Intel's Stocks: Swift Growth Changed For Steep Decline

Intel's Stocks: Swift Growth Changed For Steep Decline

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It's financial report season, and today, we'll focus on victories and losses of Intel, a developer and ptoducer of microprocessors from the USA. We'll try to find out what was the reason for the swift growth of its stock price that changed for an equally impressive decline. Let's get started!

What is it with the report?

On January 21st, Intel corporation published its financial results for Q4, 2020 — and demonstrated that analysts had underestimated it. According to the management, the main reason for such strong annual performance is a high level of PC sales: since a year ago, it's grown by 8% to 40.1 billion USD. Thanks to the pandemics!

Show me the digits!

If you want just data, let's compare the performance of 2020 and 2019:

  • Revenue — 77.9 billion USD, +8%
  • Net profit — 20.9 billion USD, -1%
  • Return on stock — 4.94 USD, +5%
  • GPM — 56%, -2.5%
  • Operating margin — 30.4%, -0.2%
  • Free money flow — 21.1 billion USD, +25%
  • Operating money flow — 35.4 billion USD, +7%

Are investors happy?

The market reacted to the report quite positively: on January 21st, the stock price of Intel reached 62.46 USD, growing by 6.46%. However, on the next day already, on January 22nd, the stocks in NASDAQ dropped to 56.66 USD, losing 9.29%.

What's the reason?

Experts blame the new director-general Pat Gelsinger for the decline. Surprisingly, less than a fortnight ago, the news that Gelsinger would replace Bob Swan took the stock price up by almost 7%.

The new CEO announced that most of microprocessors will be still produced on Intel plants. However, this is quite the opposite of what investors were eager to hear.

The corporation is in a very peculiar position. On the one hand, it fails to modernize its plants in time and, hence, produce new, competitive chips. On the other hand, the management is persistently unwilling to outsource production.

In the end, Intel lost it to Samsung and TSMC in producing microprocessors and to AMD and NVIDIA — in designing them. Of course, such a situation hardly makes investors happy, and Daniel Loeb, who manages the Third Point hedge fund and owns an almost 1 billion USD package of Intel stocks, called the management for revising the business model and study strategical alternatives.

Summing up

At the end of the last week, an American producer and developer of microprocessors Intel reported its performance at the end of 2020 and the whole year. Investors reacted positively, pushing the stocks up for 6% that very day.

However, the announcement of plans for the nearest future made by the management had quite the contrary effect - they dropped the stock price by over 9%. Investors are unhappy with the chosen business model that they think cause the company lose its part of the market swiftly.

We'll know quite soon if the new director-general Pat Gelsinger will hear them out and change the course.

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