Top Line Still Weak At Intel

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Intel’s second quarter results reflect improving conditions in the PC market segment.

Paul Otellini, CEO, Intel

Everybody is gonzo about Intel’s (INTC) second quarter earnings report after today’s close but I just don’t see what’s so great about it.

They beat revenue and earnings estimates of $7.28 billion and 8 cents a share coming in at $8.0 billion in revenue and 18 cents a share – excluding a huge fine by the European Commission.  That’s fine but fundamentally the numbers are still pretty weak.  Revenue was down 15% and net income 35% from the year ago period.  They forecast $8.5 billion in revenue for the third quarter but they earned $10.2 billion in last year’s third quarter.

Even Intel management is talking about a bottom in the 1st quarter and a recovery going forward, but I just don’t see it in the numbers.

Also, it’s worth pointing out that the stock is expensive at current levels.  It’s trading up to $18 in the after hours.  Back out the $2 in net cash and investments on their balance sheet and it’s a 24 trailing multiple on 68 cents in earnings over the last 4 quarters.  Add in the 10 cent upside surprise in today’s report and analysts are looking for 66 cents this fiscal year – also a 24 forward multiple.  Where’s the upside from here?


Disclosure: Top Gun has no position in Intel (INTC) shares but is short the QQQQ of which Intel is a component.

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