Investors thought Intel's (INTC.O) problems had melted away. Over the past year, the stock rose some 67% as demand for its microchips picked up and the company showed signs of fixing its persistent manufacturing woes. The company’s warning on Thursday that first-quarter earnings would be about 60% short of Wall Street expectations was an unwelcome reality check. It won’t be the last.
Fourth-quarter revenue increased 10% from the same period last year, and the company earned $2.7 billion, compared to a loss a year ago. The problem is the current quarter. Intel’s chip sales for PCs and servers aren’t shining, and Mobileye, its autonomous driving unit, faces customers who overbought in recent years, and are now working off inventory.
Intel suggested the remainder of the year will be better. But investors are paying about 27 times next year’s expected earnings. While the multiple has been falling over the past nine months, it is still almost twice as high as the decade's average of 15 times.
It’s also too close to Nvidia's (NVDA.O), at 29 times, despite topline growth that’s expected to be five times faster than Intel’s this year because of AI tailwinds to its business. Investors aren’t only counting on Intel fixing its manufacturing woes, but also finding new growing markets. (By Robert Cyran)
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