Intel Corporation (NASDAQ:INTC) just released its latest second-quarter results and things are looking bullish. It was overall a positive result, with revenues beating expectations by 6.3% to hit US$20b. Intel reported statutory earnings per share (EPS) US$1.19, which was a notable 15% above what the analysts had forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Following the recent earnings report, the consensus from 39 analysts covering Intel is for revenues of US$75.0b in 2020, implying a small 4.9% decline in sales compared to the last 12 months. Statutory earnings per share are forecast to drop 17% to US$4.56 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$73.8b and earnings per share (EPS) of US$4.52 in 2020. The consensus analysts don’t seem to have seen anything in these results that would have changed their view on the business, given there’s been no major change to their estimates.
With no major changes to earnings forecasts, the consensus price target fell 8.1% to US$59.13, suggesting that the analysts might have previously been hoping for an earnings upgrade. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company’s valuation. The most optimistic Intel analyst has a price target of US$90.00 per share, while the most pessimistic values it at US$45.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that sales are expected to reverse, with the forecast 4.9% revenue decline a notable change from historical growth of 7.1% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 9.5% annually for the foreseeable future. It’s pretty clear that Intel’s revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that there’s been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that Intel’s revenues are expected to perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that in mind, we wouldn’t be too quick to come to a conclusion on Intel. Long-term earnings power is much more important than next year’s profits. We have forecasts for Intel going out to 2024, and you can see them free on our platform here.
However, before you get too enthused, we’ve discovered 2 warning signs for Intel that you should be aware of.
When trading Intel or any other investment, use the platform considered by many to be the Professional’s Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email firstname.lastname@example.org.