What happened
Shares of semiconductor company Intel (INTC -9.20%) tacked on another 3.2% through 12:45 p.m. ET on Friday, the stock's third straight day of gains.
Part of the reason for Intel's mini price rally is its new guidance on earnings, which CEO Pat Gelsinger announced at the 2023 DB Tech Conference yesterday. With the third quarter underway, Intel believes it is already above the midpoint of its guidance for third-quarter earnings, and therefore on track to beat analyst forecasts for a profit of $0.21 per share.
But that wasn't the only good news Intel shared.
So what
As analysts at Deutsche Bank (DB -0.84%) said this morning, Intel's really big news yesterday was that it had received prepayment from "a large unnamed customer" that wanted to secure capacity at Intel's foundry for producing specialized semiconductors. This demonstrates the viability of the company's foundry plans, the bank said, and the potential success in growing revenue from manufacturing chips for other semiconductor design companies.
Now what
Assuming the analysts are correct in evaluating Intel's news, revenue from Intel's foundry business could begin growing as early as the second half of this year. This is also the kind of development that might be highlighted in the company's upcoming earnings report -- and potentially affect management's revenue guidance through the end of this year and into 2024.
So Intel might have told investors two things yesterday: first, that it's going to beat earnings in the third quarter, and second, that it might raise guidance and promise further earnings beats in the future.
There's a speculative element to all of the above, and it's hard to see how the news Intel gave yesterday is sufficiently good to make this stock a buy at its current valuation of nearly 63 times forward earnings.
Still, after more than two full years of mostly bad news and sagging share prices, it's understandable if investors are starved for good news at this point, and jumping at the chance of any light at the end of Intel's long, dark tunnel.
