Intel shares fell 29% on Friday after a third-quarter report that raised doubts about the company's turnaround. Wall Street analysts disagree on whether the drop is a buying opportunity, and several say staying on the sidelines is the better call.
Intel stock declined 29% to about $65 a share on Friday, its worst one-day performance since 1974. The stock had been up about 150% this year before the third-quarter earnings report.
Why the earnings report disappointed
Intel beat third-quarter earnings estimates but reported revenue slightly below consensus. Investors were particularly disappointed with weakness on the personal computer side, given high memory chip pricing. In addition, Intel revealed supply and production problems on the server side, and its fourth quarter revenue guidance also came in below consensus.
Bank of America, Roth Capital Partners and Seaport Research Partners all downgraded the stock to neutral from buy. JPMorgan and Goldman Sachs maintained their neutral ratings but lowered their price target on the stock. New Street upgraded Intel to buy from neutral.
Analysts split on buying the dip
KeyBanc's John Vinh told CNBC the sell-off was overdone and said he believes Intel's problems are temporary. He expects the PC business to stabilize in the second quarter, with some recovery in the second half from natural restocking.
Seaport's Jay Goldberg takes the opposite view. According to CNBC, he said Intel has planning and capacity issues and that "it’s kind of dead money" until it fixes them. He also believes Intel will be in good shape once it fixes capacity issues.
Server demand outruns supply
The server business shows the strength of demand. Data center and AI revenue rose nearly 80% year-over-year to $7.3 billion, exceeding expectations. CEO Lip-Bu Tan said the company expects industry server CPU units to grow 30% in 2026 and 2027, a figure that would be higher in both years if additional industry supply were available.
Management blamed the stalled momentum in the data center segment on an explosion at a fab plant in Israel earlier this month. Vinh said that if Intel can bring on incremental capacity in the second half of next year, things could start moving in the right direction.
The U.S. government's 433 million share stake shed about $11 billion in value, according to CNBC analysis, though it remains up about $20 billion overall. Both Vinh and Goldberg say the stake offers little reason on its own to buy the dip.
Source: CNBC
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