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Stock Analyst Update

Intel Earnings Warning Hardly a Big Surprise

The stock won't be compelling at least until PC demand shows signs of recovering.

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What Happened?
Thursday evening, Intel (INTC) warned investors that fourth-quarter revenue growth would fall below Wall Street expectations. Management now expects no sequential revenue growth in the December quarter, whereas it previously projected a growth rate of between 4% and 8%. Prior to Thursday's warning, the First Call consensus earnings expectation for Intel's fourth quarter was $0.42 per share. Factoring in a lower revenue-growth rate, however, Intel’s earnings are much more likely to come in at between $0.37 and $0.38 per share, which would be more than 10% below current expectations.

What It Means for Investors
As we asserted at the end of Intel’s September quarter, not even the precipitous fall in Intel’s shares has created a compelling opportunity for investors. In fact, Intel’s earnings warning is hardly a surprise, given the number of PC-related companies that have reported lackluster demand during the critically important holiday season. Increased competition from Advanced Micro Devices (AMD) only worsens the picture, and so we would avoid the shares until the outlook for PC sales improves.

Jeremy Lopez does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.