Intel Earnings: Cutting Fair Value Estimate to $35 From $40, Based on Sluggish Near-Term Results

Intel reported first-quarter results in line with our expectations but provided investors with a second-quarter forecast that fell short of FactSet consensus estimates. Shares fell about 8% after hours, a continuation of the near-term decline in Intel’s share price that started earlier this month when the company disclosed that its foundry business has been incurring greater losses, and might take longer to reach breakeven, than previously anticipated. We reduce our fair value estimate for no-moat Intel to $35 per share from $40, in part due to the softer near-term results, as well as lower long-term gross margin estimates given the steeper climb that we foresee for Intel’s foundry business to break even.