Will Weaker Than Expected Numbers Lead To A Drop In Intel’s Share Price Post Earnings Release?

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Intel (NASDAQ: INTC) is slated to release its Q4 and full-year 2019 results on January 23, 2020. For FY 2019, Trefis estimates that the company will report revenues of $70.1 billion (vs. consensus estimate of $70.98 billion) slightly lower than $70.9 billion in 2018, due to a drop in client computing and data center revenue. We also expect the company to report EPS of $4.41 (vs. consensus estimate of $4.61), lower than the $4.48 in 2018, due to lower revenues, which are expected to drop at a rate faster than expenses.
We believe that weaker-than-expected earnings for FY 2019 will very likely result in Intel’s stock falling in price once earnings are announced. In fact, our forecast indicates that Intel is fairly valued at $57 per share, which is roughly 4% below its current price of $60.

Trefis shines the spotlight on key assumptions and data for Intel, and our hypothesis lays out one possible set of expectations. You can chime in with your own expectations for Intel’s FY19 earnings in our interactive dashboard.

A] Revenues are expected to miss consensus estimates

  • Trefis estimates Intel’s 2019 revenues to be $70.1 billion, lower than consensus estimates of $70.9 billion.
  • Revenue is expected to drop 1.1% from $70.9 billion in 2018 to $70.1 billion in 2019.
  • A drop in Client Computing and Data Center Revenue, to nullify growth in Internet of things revenue, leading to a $800 million drop in total revenue.
  • Meanwhile, other revenue is expected to remain roughly stagnant.
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A separate interactive dashboard for Intel provides an in-depth view of Intel’s revenue trend and segment-wise revenue performance, along with the forecast for 2019.

B] EPS likely to miss consensus estimate

  • Intel’s 2019 earnings per share (EPS) is expected to be $4.41 per Trefis analysis, ~4% lower than the consensus estimate of $4.61 per share.
  • EPS expected to decrease 1.5% from $4.48 in 2018 to $4.41 in 2019.
  • We forecast Intel’s revenue to drop marginally in 2019, but with expenses dropping at an even lower rate, net income margin is expected to drop from 29.7% in 2018 to 29% in 2019.

C] Stock price estimate ~4% lower than the market price

  • A trailing P/E multiple of 12.9x looks appropriate for Intel’s stock, in line with the current implied P/E multiple.
  • Trefis’ forecast for Intel’s 2019 earnings is slightly lower than market expectations, working out to a fair value of $57 for Intel’s stock as opposed to the current market price around $60.

Additionally, you can input your estimates for Intel’s key metrics in our interactive dashboard for Intel’s FY19 earnings and see how that will affect the company’s stock price.

 

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