Tech Stocks Shine in Fourth-Quarter Earnings Season: Intel’s Optimistic Outlook

The fourth-quarter earnings season is underway, and tech stocks are poised to take center stage as the standout segment of the benchmark S&P 500. However, when you remove six of the seven so-called “Magnificent Seven” stocks, S&P 500 earnings face a forecasted slump of approximately 6% for the latest three months. Despite this, some stocks reporting earnings in the coming week have witnessed analysts increasing their profit forecasts. One such stock is the chipmaking giant, Intel.

Intel’s Earnings Optimism

Intel, a prominent player in the semiconductor industry, is set to report its fourth-quarter results on January 25, 2024. Wall Street’s outlook for Intel has grown increasingly optimistic in the lead-up to this announcement. Approximately 35 analysts polled by FactSet have raised their earnings per shareEarnings per share (EPS) is a fundamental financial metric that provides valuable insights into a company's profitability. This widely used indicator helps investors and analysts g... More (EPS) estimates by an average of more than 36% over the past three months. As a result, analysts now anticipate that Intel will report an adjusted EPS of 45 cents next week.

This surge in optimism is underpinned by several factors, including Intel’s recent product announcements and strategic initiatives.

Intel’s Strategic Moves

In the previous month, Intel unveiled a new slate of chips, including Gaudi3c, specifically designed to power generative artificial intelligence (AI) software. This move represents Intel’s concerted effort to compete with other AI powerhouses in the semiconductor space, notably Nvidia and AMD. By investing in AI-focused technology, Intel aims to carve out a more significant presence in the rapidly evolving AI landscape.

Analysts’ Perspectives

Several leading financial institutions have expressed their views on Intel ahead of its earnings release:

1. TD Cowen: The firm raised its price target on Intel (INTC) to $45 from $38 while maintaining a Market Perform rating. TD Cowen anticipates a bit of upside for the fourth quarter of 2023 driven by Client and modestly better DCAI (Data Center and AI) sales. However, their estimates for the first quarter of 2024 have been adjusted lower due to a sizable guide-down at Mobileye (MBLY) and server seasonality.

2. Susquehanna: Susquehanna raised its price target on Intel to $42 from $38 and maintains a Neutral rating on the shares. The firm expects Intel’s results to be generally in-line with expectations but potentially lighter on guidance. They also anticipate in-line margins for the fourth quarter but foresee a downward trend with seasonality in the first quarter.

3. Barclays: Barclays analyst Tom O’Malley raised the firm’s price target on Intel to $44 from $32 while maintaining an Equal Weight rating. O’Malley rolled out 2025 projections across the semiconductor and semiconductor capital equipment space, expressing a preference for companies aligned with the “2nd Wave” of artificial intelligence. This price target adjustment is part of Barclays’ 2024 outlook.

4. Citi: Citi raised its price target on Intel to $47.50 from $34 and maintains a Neutral rating on the shares. The analyst at Citi believes that Intel continues to execute effectively on its manufacturing roadmap, which is a notable differentiator from its competitor, TSMC (Taiwan Semiconductor Manufacturing Company). This competitive advantage positions Intel to potentially regain market share, driven by its “superior stability and peripherals.” Consequently, Citi contends that the stock should trade at a higher multiple.

Bottom-line: As Intel prepares to unveil its fourth-quarter earnings, a wave of optimism surrounds the chipmaking giant. The upward revisions in earnings estimates by Wall Street analysts reflect confidence in Intel’s strategic initiatives, including its foray into AI-focused technology. While Intel faces competition from formidable rivals, its execution on manufacturing and its product roadmap provide a strong foundation for future growth and market share gains. As Intel’s earnings report approaches, investors and industry observers eagerly await insights into the company’s performance and its potential impact on the broader semiconductor sector.