Will Intel's earnings improve sentiment in semiconductor market? 🔌

Intel (INTC.US) will report Q4 2022 results after the close of the Wall Street session. The report could have a significant impact on sentiment around other semiconductor companies and will shed more light on the health of the global technology market.

Forecasts:

Revenue: 14.468 billion (down 24% y/y)

Earnings per share (EPS): $0.20 vs. $1.09 in Q4 2021 (down more than 80% y/y)

Intel will see a 23% drop in revenue from its PC-centered business and a 40% drop in sales from data centers, according to FactSet

Revenues from the data center segment will be burdened by lower revenues from cloud computing companies such as Microsoft, Amazon and Alphabet (Google), whose databases consumed a huge number of chips. In the PC market, the company is losing market share to AMD and the high-performance ARM chips to which most tech giants including Apple and Amazon have already switched. PC sales could weigh on both the company's earnings and forecasts for the first quarter of the year. 

• The recession points to a tougher time for chipmakers. Aggressive rate hikes by central banks have hit demand and financing conditions; Also, the slowdown in China and the 'Covid zero' policy have had a negative impact on the industry;
• Intel's cash from operations shrank to $7.7 billion in the first nine months of 2022 from a record $24.1 billion in the same period of 2021. At the same time, expenses rose to reach $19.1 billion from $11.6 billion a year earlier;
• According to IDC, global PC shipments fell 28% year-on-year in Q4 2022. Analysts at the Susquehanna Fund and Citi indicated that Intel's slowdown could worsen in 2023 in the face of evolving competitor technologies and lower corporate spending;
• Given the huge demand for technology in the pandemic era driven by remote work and cheap credit in an environment of supply shortages, the company has sharply increased production, but conditions have weakened fundamentally. 

Investments continues

• The company's research and development expenses in the first nine months of 2022 rose 17% y/y contributing to a 10% increase in operating expenses. Intel is in the midst of a $5.4 billion acquisition of chipmaker Tower Semiconductor, but much more interest is beginning to be generated in ARM chips, which the company does not produce;
• Intel CEO Pat Gelsinger at the Davos Economic Forum confirmed a sizable slowdown in the industry, but expects to realize long-term growth and is continuing to make strategic investments in the industry;
• Intel's $20 billion semiconductor hub is being built in Arizona. With US-China relations in crisis, the issue of diversifying production and costly relocation away from China-threatened Taiwan, the world's chip manufacturing hub, has been raised among Western companies;
• Intel's stock price has fallen 39% over the past year; the company paid a 4.9% dividend. 

Intel stock (INTC.US), D1 interval. Looking from the side of technical analysis, the share price has recently formed a bullish double-bottom formation, which may help the demand side if the company beats Wall Street forecasts. Source: xStation5