Intel price target cut at Citi as guidance hurt on heavy investment, PC correction
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Intel (NASDAQ:INTC) shares are slipping early Thursday, as Citi cut its price target on the chipmaker after it gave "very poor" guidance due to a number of reasons, including heavy investment and a PC inventory correction.
Analyst Christopher Danely lowered his price target to $55, but kept the neutral rating, noting that the fourth quarter was strong, with revenue up 8% sequentially to $19.5 billion, above his estimate of $18.5 billion. However, revenue guidance of $18.3 billion and gross margin guidance of 52%, down from 55.4% in the fourth quarter, along with an expected EPS of 80 cents a share are reflective of Intel trying to turn itself around and become a growth company again.
"We expect PC demand to revert to the mean in 2022 given two years of double-digit growth," Danely wrote in a note to clients.
Intel (INTC) shares are down nearly 2.5% to $50.43 in pre-market trading.
For the quarter ending December 25, Intel (INTC) reported a profit of $1.09 a share, excluding one-time items, on revenue of $19.53 billion, compared to earnings of $1.48 a share, on $18.9 billion in revenue in the same period a year ago. Wall Street analysts had forecast Intel (INTC) to earn $0.79 a share on revenue of $18.36 billion.
For the first quarter of this year, Intel (INTC) is forecasting earnings of $0.80 a share, or a 40% decline from a year ago, and revenue of $18.3 billion, which would be off by 1% on a year-over-year basis. Still, Intel's (INTC) outlook is better than analysts' estimates for a profit of $0.79 a share, on $17.63 billion in sales.
In addition, Danely said there should be caution as Intel mentioned an "inventory correction" in notebooks. 
On Wednesday's earnings call, Intel (INTC) Chief Executive Pat Gelsinger said it is seeing signs that product inventories are getting back to where they were before the start of the COVID-19 pandemic, but that supply issues will impact the chip industry for the foreseeable future.