The reason why Intel dropped 15%

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by automax

On Thursday afternoon 5pm:

Stock dropped 10 % in premarket, then another 7%. To be 17% before the market actually opened.

I wanted to see what happened, as eps and revenue was beaten, so it was suprising that such a big company could be down -15%. This is like penny stocks kind of move.

After listening to the call, I now understand that the price was directly affected by these analysts and this call. Infact it could be 75% affected by this call.

The call

Hare are the participants of the call:
It may have taken place around 4pm ET (unconfirmed) but before market closed.

Intel Company Participants

Trey Campbell – Director, IR

Bob Swan – CEO

George Davis – CFO

**Participants:**

Vivek Arya – Bank of America

C.J. Muse – Evercore

John Pitzer – Credit Suisse

Ross Seymore – Deutsche Bank

Stacy Rasgon – Bernstein Research

Timothy Arcuri – UBS

Weston Twigg – KeyBanc Capital Markets

Srini Pajjuri – SMBC Nikko

Here is the call itself

static.seekingalpha.com/cdn/s3/transcripts_audio/4360453.mp3

SUMMARY

Bob and George speak about positives

############################

See in the earnings call, the first thing that was mentioned is that intel is very soon releasing TIGER LAKE which according to this article is faster than AMD

wccftech.com/intel-tiger-lake-10nm-11th-gen-cpu-benchmarks-leak-out-core-i7-1165g7-vs-amd-ryzen-7-4800u/

They also mentioned datacentre On-Die Interconnect is available

www.intel.com/content/www/us/en/silicon-innovations/6-pillars/interconnect.html

www.intel.com/content/www/us/en/foundry/emib.html

This helps data move between different compute engines, memory, and I/O and ensure very high low latency. Something which linux struggles with and has to use the same numa nodes to combat this.

AMD doesn’t have this technology. This is very important since the Datacentre industry is worth 23 billion.

They mentioned the delay in 7nm because of yield degradation. But didn’t really elaborate on that.

##########################

Then they talked about:

– Increased revenue over spending

– investing 900 Million, on 160 Billion dollar mobility opportunity

########### cfo ###############

– record revenue up 20%

Datacentre revenue up 34% which is 52% of total revenue

Desktop sales up 9%

47% revenue up in cloud

The analysts didn’t really buy it.

######## Q & A ############

1st Q – Vivek Arya – Bank of America

Asked about 7nm delay, whats the market implication of that and outsourcing.

– Bob kind of didnt really answer the question and beat around the bush.

George mentioned that they have big demand for 10nm so it won’t affect the market too much. He mentioned that the focus is on global economy because of coronavirus than 7nm.Didn’t really answer the question well.

2nd Q – C.J. Muse – Evercore

Follow up question on 7nm delay, contingency

3rd Q – John Pitzer – Credit Suisse

Follow up question on 7nm delay, and how will INTEL avoid the same mistake.

A: Didnt really answer the question well, just mentioned that they have milestones and will be more pragmatic

4th Q – Ross Seymore – Deutsche Bank

Asked if they can make 7nm the focus.

A: Mentioned that 10nm is a great product. beat about the bush.

5th Q – Stacy Rasgon – Bernstein Research

Asked about the margins of 7nm and 10nm

A: They are growing faster in 5g comms side and had a higher product demand for 10nm.

6th Q – .Timothy Arcuri – UBS

long term implication of outsourcing some of the process technology

7th Q – Weston Twigg – KeyBanc Capital MarketsDatacentre Revenue, decline in Datacentre revenue

Answers: The drop on DCG earnings because of:

– Intel peaked on cloud

– Intel peaked on govt

– Intel peaked on comms

This is not a good look, I feel that the answer wasn’t really straight forward.

8th Q – Srini Pajjuri – SMBC Nikko

Guidance on q4

A: Expect to be lower.Again not a good look and you can even hear the tone, that Srini wasn’t impressed.

#######################

Basically this call didn’t really leave a good impression on the analysts, I think the -15% is deserved because the CEO and CFO can’t answer questions truthfully, beat about the bush. The expectation for future quarters is low.

The only thing that can save Intel now, is change the CEO and CFO.

I expect the share price to drop to 40.

It really sucks because I hold Intel. Now I have to hold this stock for the next year and put in extra money to cover the stop losses and fees.

There might be a boost with tiger lake but thats about it.

 

 

Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or Consult your financial professional before making any investment decision.

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