Intel stock pulls back from post-earnings jump. Here’s why.

00:00 Speaker A

Our next guest, one of several analysts who raised their price targets on the stock today. Still, our guest saying the fight is far from over for Intel. He’s still got a market perform rating. Stacy Rasgon is with us, Bernstein managing director and senior analyst.

00:15 Speaker A

Stacy, you said in your note you were surprised at that initial pop in the shares. And indeed, it’s kind of coming back down to earth.

00:24 Stacy Rasgon

Yeah.

00:25 Stacy Rasgon

Yeah, I I I really was. I mean, look, on on the surface, it was it was good. You know, they they beat the quarter.

00:32 Stacy Rasgon

Core markets, PCs and servers a little better, which I I think should have been expected, but they were a little better. And they said they were actually supply constrained. They said demand exceeds supply. So that on the surface that sounds good, and I think that’s why the stock was up. But you start to dig in, the reason they’re supply constrained, it it’s on their older generation parts, their their 10 nanometer and 7 nanometer parts. That’s because their older parts at this point are offering more value to customers than their newer parts. And and frankly, they’d gotten rid of like equipment to make those older parts a few quarters anyways ago anyway. So

01:00 Stacy Rasgon

that’s actually why they’re supply constraint is because nobody wants to buy the newest stuff. And then, you know, he made some comments on on 18A, which is their new process that they’re now ramping into production and everybody’s been concerned about yields and everything and he basically said, the CFO said, yields are kind of adequate for the ramp,

01:18 Stacy Rasgon

but it doesn’t sound like they’re in a great place and he and he kind of suggested they wouldn’t be in sort of like like where they really want them to be probably until the end of next year. Mm. So it does sound like that yield ramp is is taking a while, maybe longer than people expected.

01:31 Stacy Rasgon

And so you start to tie all of that out, you know, strong demand, which by the way is probably temporary, like it’s Windows’s end of life and everything else. Um, tight supply, but it’s because, you know, they’re they’re people are buying the older stuff rather than the newer stuff, and then like a yield trajectory that actually didn’t actually sound that great. I’m actually not surprised it’s coming back to Earth now. Um, this is more in line with what I what I might have expected. Maybe it just took some time for people to dig through the results because the headline numbers were actually pretty good.