Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Intel Stock Crashed After a Great Q1 Report

By Anders Bylund - Apr 24, 2021 at 7:03AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Myopic bears are roaming Wall Street today, driving the chip-titan's stock lower.

At first glance, semiconductor-giant Intel (INTC -2.86%) did everything right in the first quarter of 2021. The company delivered earnings of $1.39 per share on sales of $18.6 billion, blowing past Wall Street's consensus estimates of $1.15 per share and $17.9 billion. The company also raised its full-year earnings outlook just above the analyst view, and Intel's revenue targets consistently landed slightly ahead of the Street.

Results like these typically send share prices skyward, but Intel's stock was down 7% in Friday's early market action. The bearish market makers had their reasons, of course. Here's why Intel shares dropped despite those mighty fine first-quarter results.

Two hands give thumbs-up and thumbs-down signs in front of several uncut semiconductor wafers.

Image source: Getty Images.

Soft guidance

First and foremost, Intel's guidance for the next quarter came in below expectations. Management sees second-quarter earnings stopping near $1.05 per share, which is below the Street's current consensus of $1.09 per share. That small slip-up is enough to spark a bearish attitude among the more short-sighted investors and analysts out there.

Trouble in paradise

Intel's first-quarter results were not uniformly impressive. Datacenter sales fell 20% year over year to $5.6 billion, suggesting that arch-rival Advanced Micro Devices (AMD -3.66%) may be stealing market share in this crucial sector. Any weakness here also opens the door for NVIDIA (NVDA -4.20%) to find a foothold with its recently announced data center processors.

This is a continuation of trends seen in recent quarters, but Intel bears can point to this weakness in support of their negative analyses of the company and its stock.

A red arrow follows a bar chart lower, bouncing upward from the chart's bottom.

Image source: Getty Images.

Why I'm not worried

As an Intel shareholder, I actually saw many reasons to applaud this report.

  • Week-by-week business trends indicate that the data center weakness has peaked and should return to growth in the next quarter.
  • The well-documented manufacturing issues that kept Intel from dominating the 7-nanometer processor generation are reaching an end. Intel is taping out early designs for its first 7-nanometer CPU, scheduled for market debut in 2023.
  • Intel is hiring thousands of engineers and investing billions of dollars in infrastructure and research and development efforts, all to reignite the company's storied culture of innovation. This is an expensive but important step that sets the stage for stronger business results in the long run.

"It's amazing to be back at Intel, and Intel is back," CEO Pat Gelsinger said on the earnings call. "You can feel the energy inside of Intel, the passion to innovate, and the drive that made us great."

Let me also remind you that Intel's financial targets for the full year were respectable, and the stock is falling today due to an unreasonable focus on short-term challenges. If anything, I'm tempted to buy more Intel stock at these lower prices. Maybe you should, too.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Intel Corporation Stock Quote
Intel Corporation
$36.34 (-2.86%) $-1.07
NVIDIA Corporation Stock Quote
NVIDIA Corporation
$145.23 (-4.20%) $-6.36
Advanced Micro Devices, Inc. Stock Quote
Advanced Micro Devices, Inc.
$73.67 (-3.66%) $-2.80

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.