Intel Struggling at Support after Q2 Warning

Dow component Intel Corp. (INTC) is trading lower by more than 4% after meeting Q1 2022 estimates and guiding Q2 results below consensus. The chip giant posted a profit of $0.87 per-share during the quarter while revenue fell 6.6% year-over-year to $18.4 billion. The company reaffirmed fiscal year 2022 numbers but the mixed outlook didn’t sit well, with rising inflation, chronic supply chain issues, and long-term instability in Eastern Europe weighing on sentiment.

Bad Year for Chip Stocks

The chip sector has struggled so far in 2022, posting year-to-date losses across the board. PHLX Semiconductor Index is down 23% and showing no signs of stabilization, with sector leaders that include Advanced Micro Devices Inc. (AMD) and NVIDIA Corp. (NVDA) sitting at 9-month lows. Intel is outperforming the sector with a 10% loss but has lost a stomach-churning 35% since April 2021 while accumulation has dropped to a 9-year low.

CEO Pat Gelsinger chatted up the mixed report, insisting that Q1 “was a strong start to the year, exceeding expectations on both the top- and bottom-line. With a $1 trillion market opportunity ahead of us, we remain laser focused on our IDM 2.0 strategy. We executed well against that strategy in Q1, delivering key product and technology milestones and announcing plans to expand our manufacturing capacity in both the US and Europe to meet the continued demand for semiconductors and drive a more balanced, resilient global supply chain.”

Wall Street and Technical Outlook

Wall Street consensus stands at an apathetic ‘Hold’ rating based upon 7 ‘Buy’, 2 ‘Overweight’, 22 ‘Hold’, and 3 ‘Underweight’ recommendations. In addition, six analysts now recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $40 to a Street-high $75 while the stock is set to open Friday’s session more than $5 below the median $50 target. Further downgrades at this point could trigger a rapid decline into the low target.

Intel sold off from 75.81 to 12.06 between 2000 and 2009 and has traded within those boundaries for the last 13 years. A slow motion uptick reversed at the .786 Fibonacci selloff retracement level in January 2020 while an April 2021 test triggered a reversal that’s relinquished more than 23 points into Friday’s opening bell. The stock is now sitting on horizontal support that’s been tested multiple times since 2017, with each occurrence raising odds for an historic breakdown.

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Disclosure: the author held no positions in aforementioned securities at the time of publication.