Intel Shares Down Despite Buyback Announcement

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Shares in US tech firm Intel are trading a little under 0.5% lower pre-market on Thursday.

The sell-off comes despite news that Intel has actioned a $10 billion stock buyback operation.

The company announced on Wednesday that it is entering into an accelerated repurchase agreement to reclaim $10 billion in company stock.

166 Million Shares to be Repurchased

Intel noted that by the completion of the program, it will have bought back $17.6 billion in shares. The company announced its stock buyback plan in October 2019.

Based in California, Intel said it will re-purchase 166 million shares under the terms of one its current buyback agreements which is due to complete at the end of this year.

Commenting on the company’s outlook, Intel CEO Bob Swan said:

“While the macro-economic environment remains uncertain, Intel shares are currently trading well below our intrinsic valuation, and we believe these repurchases are prudent at this time”.

19% Fall in Share Price

Shares in Intel have fallen around 19% over the last month despite the firm posting a positive set of Q2 earnings.

Intel posted Q2 earnings per share of $1.19, beating estimates of a $1.11 reading. This result marked a 16% rise on the same period last year.

Revenues were higher by 20% year on year, rising to $19.7 billion and beating estimates. The breakdown of the data showed that data-centric revenues rose by 34% over the prior, accounting for 52% of total revenues.

Revenues Surged Despite Difficult Environment

Swan said that the backdrop in Q2 had been a “very challenging environment.”

However, he noted that increases in the firm’s network infrastructure, PC capabilities and cloud demand had fuelled a rise in revenue growth. Swan said:

“Those trends contributed to a very strong quarter in which we generated $19.7bn in revenue, and delivered $1.23 in earnings-per-share.”

Warnings Over Product Delays

Despite this, sentiment towards the company has turned bearish over the last month in response to news of product delays.

Swan noted that issues with the firm’s 7-nanometre development process had resulted in a 12 month delay time. Commenting on this, Swan said:

“We have identified a defect mode in our 7-nanometre process that resulted in yield degradation. We’ve root-caused the issue and believe there are no fundamental roadblocks, but we have also invested in contingency plans to hedge against further schedule uncertainty.”

Intel Shares Sitting On Key Support

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Shares in Intel have plummeted lower on the back of the Q2 earnings report which saw the firm warning over product delays.

Price has broken down below the 55.79 level. It is now testing support at the 48.51, sitting just in the lower half of the broad bearish channel.

Should price break below here the next area to watch will be the 2020 lows around 44.80.

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