To The Moon

$Intel(INTC)$

Let's discuss Intel's announcement at the Consumer Electronics Show (CES). Today I will covered Intel, on the day of their announcement, Intel's stock dropped about 3.3%. However, as of this recording, the stock is relatively flat, up around 1%, despite a weak overall market and semiconductor sector, driven by job report data, which we'll cover shortly.

Intel has faced a challenging stock performance over the past year—actually, the past few years. Currently, the company has a market cap of $85.7 billion and a forward P/E ratio of 28.5. Regarding the labor market, November saw job openings rise more than expected, though other metrics—like hiring and quits rates—indicate cooling. For example, hiring and quits rates are at their lowest since 2013 and 2015 (excluding the pandemic). These changes, while noteworthy, likely won't impact the Federal Reserve's plans significantly.

Product Highlights: Lunar Lake and Beyond

Intel announced they shipped over 1.5 million Lunar Lake CPUs in 2024, expecting over 4% total PC TAM (total addressable market) growth in 2025, according to IDC projections. A significant refresh cycle is anticipated, as consumers upgrade to newer, more efficient products offering better performance per dollar. Intel's co-interim CEO emphasized customer-centric innovation—a much-needed shift from their previous approach of dictating market trends rather than listening to user needs.

Looking ahead, Panther Lake, launching in the second half of 2025 and built on the 18A process, is expected to be a game-changer. Laptops featuring 18A technology were already showcased at CES, though they're not widely usable yet. Intel also unveiled the Core Ultra 200 series, including the 200H mobile processors, which deliver enhanced performance, efficiency, and AI acceleration via integrated neural processing units (NPUs). Other product launches include the 200V (for business productivity), 200U (mobile), and 200S series (desktop processors), catering to diverse consumer and enterprise needs.

Competitive Benchmarks and Financials

Intel claimed significant out performance of its Ultra 9 285HX processor against AMD's HX 375 based on internal benchmarks. However, third-party testing will provide a clearer picture. It's worth noting that Intel's client computing business remains robust, generating $7.3 billion in revenue last quarter. Although down slightly from prior quarters, this segment boasts a solid operating margin of 37.1%. Meanwhile, Intel's Foundry Services, while essential for long-term growth, continue to be a drag on profitability.

Guidance

For Q4, Intel's guidance suggests revenues of $13.3–$14.3 billion, down $1.6 billion year-over-year, with gross margins at 39.5% (a 9.33 percentage point decline) and EPS of $0.12 (down $0.42 year-over-year). Despite these projections, I wouldn't be surprised if Intel beats its guidance, given its focused approach to customer demands and upcoming product cycles.

Revenue Expected to range between $13.3 billion and $14.3 billion, representing a year-over-year decline of $1.6 billion. This decline reflects continued challenges in key segments, including Client Computing and Data Center.

Gross Margins: Anticipated to be 39.5%, a significant decline of 9.33 percentage points year-over-year. The lower margins are attributed to pricing pressure, higher costs related to advanced manufacturing nodes, and investment in Foundry Services.

Earnings Per Share (EPS): Forecasted at $0.12, down $0.42 year-over-year, signaling weaker profitability due to reduced sales and higher operating expenses.

Stock Performance

Intel's stock has under performed compared to competitors like AMD and NVIDIA. Shares have declined significantly due to slowing growth and eroding market share. Currently, Intel's stock hovers around $20, just below its 20-day moving average, a level it has maintained since August 2024. Any significant movement will likely occur following the next earnings report. The stock remains far below its historical highs, a stark contrast to its glory days as a market leader.

Risk And Challenges

Intel remains a stock to avoid. Its shares have declined sharply over the past year as it continues to lose market share to competitors like AMD.

Ongoing Struggles: Once a dominant force in the chip market, Intel has faced challenges adapting to key trends, particularly the AI boom. Its inability to keep pace has eroded its market share and dragged down its stock price.

Leadership and Strategy Issues: Intel recently ousted CEO Pat Gelsinger amid struggles to revitalize the company. Moving forward, the company needs new leadership and a clear growth strategy to stage a turnaround.

Foundry Business Uncertainty: Intel's pivot to becoming a chip manufacturer for other companies hinges on large-scale factory projects funded by the CHIPS Act. However, potential political changes and uncertainty around continued government funding add to the risks.

Conclusion

In summary, Intel's focus on customer-driven innovation is a welcome change. Key developments, such as the upcoming Panther Lake on 18A, could drive substantial growth in 2025. For now, the market awaits the company's next earnings call for further insights.

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