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Intel CEO on stock price sell-off after earnings: It’s an overreaction

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Intel CEO Pat Gelsinger‘s message to investors dumping the stock after a tepid first quarter outlook: Stay the course — the turnaround that gained steam in 2023 hasn’t stalled.

“It’s an overreaction,” Gelsinger said on Yahoo Finance Live of the sharp market reaction on Friday to Intel’s disappointing first quarter guidance the night before.

Shares of the chip giant plunged 11% — with the stock a top trending ticker on Yahoo Finance — as Intel said it would see near-term sales and profit challenges in areas such as its data center and Mobileye businesses.

Gelsinger believes those issues will abate in the second quarter as Intel unleashes a host of new chips to support AI workloads and hardware.

Wall Street isn’t so sure.

“The main reason they guided so poorly was their ‘growth businesses’ are not growing, and in fact, they’re contracting,” Citi analyst Christopher Danely told Yahoo Finance Live.

Gelsinger said that Intel expects to see 40 million shipments of AI PCs in 2024, and all of the company’s planned chip launches for the year remain on track.

Intel recently showcased a range of AI-focused products and services. On display was Gaudi3, an artificial intelligence chip for generative AI software that will become available later this year.

The company has also unveiled its Core Ultra processor, which will target the aforementioned emerging AI PC market.

Gelsinger added he has a line of sight into $10 billion in orders for Intel’s new foundry business. The business is set up to be a consistent money-maker for Intel beginning in 2025, contends Gelsinger.

Despite the green shoots in the quarter, Wall Street is largely sticking with the view Intel is a show-me investment story.

“Overall, we are seeing continued solid execution by the team, compute fundamentals continue gradually improving, and although we continue to be impressed by the current execution, the next 12 months will be the most difficult for the team as they will be launching two datacenter products and two major client products over three new manufacturing technology nodes,” said JPMorgan analyst Harlan Sur in a client note reviewed by Yahoo Finance.

Sur reiterated an Underweight rating on Intel’s stock with a $37 price target, about 16% lower than current levels.

Pat Gelsinger, CEO of Intel, responds to a question during a keynote conversation at CES 2024. (Steve Marcus/REUTERS) (REUTERS / Reuters)

The earnings rundown

Net Sales: +10% year over year to $15.4 billion vs. estimate of $15.11 billion

Client Computing Sales: $8.84 billion vs. estimate of $8.42 billion

Data Center & AI Sales: $4 billion vs. $4.08 billion

Network & Edge Sales: $1.47 billion vs. $1.55 billion

Mobileye Sales: $637 million vs. $627.2 million

Intel Foundry Sales: $291 million vs. $342.5 million

Adjusted Gross Margin: 48.8% vs. 46.5% estimate

Adjusted EPS: $0.54 ($0.15 a year ago) vs. estimate of $0.44

What else caught our attention: Weak first quarter guidance

Net Sales: $12.2 billion to $13.2 billion vs. estimate of $14.25 billion

Adjusted EPS: $0.13 vs. $0.34 estimate

Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on Twitter/X @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email brian.sozzi@yahoofinance.com.

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