Intel shares plummeted on Friday to the lowest level since January after the chip maker reported third-quarter results and detailed a spending plan that it said would pressure profitability over the next few years.
The stock dropped as much as 12%, its biggest intraday percentage decline since July 2020, and this is set to be the sixth straight quarter where Intel’s results were met with a negative reaction. The decline erased more than US$20-billion in market value, resulting in a market capitalisation of about $203-billion. For the first time, Intel is smaller than Broadcom, which has a market valuation above $214-billion.
The weakness in Intel’s stock appeared contained. The Philadelphia Stock Exchange Semiconductor Index rose 0.2% on Friday, with some names expected to benefit from Intel’s spending plans. Semiconductor capital equipment stocks were especially strong, with Applied Materials up 4.4%, Lam Research gaining 2.8% and KLA surging 5.2%.
Applied Materials gets about 8.8% of its revenue from Intel, while Lam gets a little more than 8% and KLA derives about 7.8%.
AMD, considered a primary rival to Intel, rose 0.6%.
At least four Intel analysts downgraded the stock after the report. Mizuho Securities cut its view to neutral, writing that the “capital-intensive foundry shift adds uncertainty to its likelihood of catching up to leading-edge by executing on its core PC/server road map”. Morgan Stanley cut the stock to equal weight, as the capital spending plan “requires underwriting a growth forecast that seems challenging”.
The consensus rating for the stock — a proxy for its ratio of buy, hold, and sell ratings — stands at 3.3 out of 5, down from 3.43 over the weekend. The average price target is $57, compared to $63 on Sunday. The current average points to upside of nearly 15%. — Reported by Ryan Vlastelica, (c) 2021 Bloomberg LP