Intel drops to the lowest price in more than a year – What does the future look like?

Intel Corporation (NASDAQ:INTC) released its fourth-quarter 2021 results on Thursday, and the resulting market reaction caused the shares to fall 6% to the lowest intraday level since December 2020.

The chipmaker reported a drop in gross margin from 60% to 55.4%. An oversupply in PCs that is slowing the demand for chips presents a challenge to the technology firm. 

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Additionally, the firm’s largest unit, the Client Computing Group, recorded a 7% drop in revenue to $10.1 billion compared to the same period of 2020 though still ahead of analysts’ estimates.

On the flip side, Intel posted a 3% year-over-year increase in the fourth-quarter revenue to $20.5 billion, surpassing October guidance by $1.3 billion. The firm expects $18.3 billion adjusted sales in the first quarter of 2022 against a $17.62 billion Refinitiv consensus projection. 

Nonetheless, Intel’s future is not all gloomy. The company’s CEO, Pat Gelsinger, says that the new generation server chip Sapphire Rapids is expected to start shipping in the quarter. Production is set to increase in the subsequent period. 

INTC daily chart outlook

The technical analysis shows INTC on a downward trend, trading below $55 resistance amid a market-wide bearish sentiment that has hit the technology stocks.

NASDAQ 100 has lost 17% since the start of the year, a situation that analysts link to the Federal Reserve tapering and anticipated interest rate hike by the central banks. 

The daily chart above also shows a market largely controlled by sellers. INTC is trading below the 20-moving average (red) and the 50-moving average (blue). The two averages would offer some resistance to the upside. If the stock drops below the current $47 support level, it could open more weakness, and INTC could trade lower.

Cowen analyst Matthew Ramsay comments that Intel faces a complicated quarter due to falling margins. Citi Research analyst Christopher Danley also points out that the expected inventory correction in the notebook end market is a concern.

Summary

INTC technical and fundamental analysis is skewed towards a bearish momentum in the short and medium terms. If the stock drops below $47 support, then $44 is the next key level. A trend reversal in any of the support with the confirmation of a bullish price action signal could still present a buy entry.

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