Intel’s earnings beat the Street’s estimates but the stock is falling. Investors aren’t concerned with short-run results. They have bigger worries.
Intel reported an adjusted third-quarter profit of $1.11 a share after Thursday’s close, beating analyst expectations by a penny. But Intel is facing production delays for a new generation of microchips, and the company couldn’t convince investors its problems were even close to being solved.
The issue has weighed on Intel’s stock. About a year ago, Intel was the most valuable semiconductor company on earth, with a market cap of roughly $220 billion. That’s still Intel’s market value, but Nvidia and Taiwan Semiconductor are now worth $334 billion and $420 billion, respectively.
If Intel isn’t careful, it risks being relegated to the category of “value tech,” once-dominant companies that failed to adapt to a changing world. IBM missed the transition to personal computing. More recently, Cisco Systems was late to the transition away from on-premises computing to the cloud.
Big changes don’t just impact technology stocks. NextEra Energy, one of the largest generators of renewable electricity, is now worth more than Exxon Mobil. And Tesla became the world’s most valuable car company selling electric vehicles.
The future is coming. Intel risks being left behind.
—Al Root
*** Whatever happened to 3D printing? The technology was supposed to be the next big thing. Then the bubble burst. Learn what happened in the latest episode of Barron’s The Readback podcast. Listen here.
***
Final Debate Focuses on Economy, Path Forward for America
In a debate that was much more restrained than the first encounter between President Donald Trump and former Vice President Joe Biden, the presidential candidates sparred over the Covid-19 response, health care, the economy, and climate change.
- The debate kicked off focusing on the response to Covid-19. Biden said Trump doesn’t have a concrete plan to safely reopen. “Anyone who’s responsible for that many deaths should not remain as president of the United States of America,” Biden said.
- Trump said the virus was going away and that the country is “rounding the corner.” He also said there is a vaccine coming within weeks, later clarifying that the timeline was not guaranteed. Trump touted candidates from Johnson & Johnson, Pfizer and Moderna, among others.
- In an exchange over each other’s finances and business dealings, Trump said the market would crash if Biden won. Biden countered: “The idea that the stock market is booming is his only measure of what’s happening. Where I come from in Scranton and Claymont, the people don’t live off of the stock market.”
- When asked about health care, Trump said Biden would terminate plans for hundreds of millions of Americans. Biden said he’s going to pass a public health care option and reduce premiums and drug prices by allowing Medicare to negotiate drug prices. He noted he supports private health insurance.
- On climate change, Trump emphasized the U.S.’s energy independence while Biden touted green energy plans. At one point, Trump asked Biden if he would “close down the oil industry.” Biden said he would “transition from the oil industry” as part of a larger effort to combat climate change.
What’s Next: This was the last major event before the Nov. 3 election and the last chance for both candidates to make their case to voters. With mail-in and early voting up and running in many states, tens of millions of Americans have already cast their ballots.
—Connor Smith
***
Jobless Claims Surprise and Stimulus Talks Continue
First-time unemployment claims have fallen below 800,000 for the first time since the pandemic began, marking a key turning point.
- Some 787,000 Americans filed new unemployment benefits claims for the week ending Oct. 17, the lowest since the Covid-19 pandemic hit the U.S. in mid-March. The figure is better than both the 870,000 claims economists had expected and the revised 842,000 from the previous week.
- A total of 8.4 million Americans received unemployment benefits during the week that ended Oct. 10, a decrease of about a million workers compared to the week before and less than the 10 million economists were expecting.
- Reporting changes played a role in the decline. California had been entering a placeholder of a quarter million new weekly claims because of a technical issue. With that resolved, the state reported under 159,000 claims for last week and just over 176,000 for the previous week.
- As much as the drop in jobless claims is good news, this week’s numbers still point to widespread job losses. So far only about half of the payroll jobs lost this spring have been recovered and more than 23 million Americans continue to receive some form of unemployment benefits.
What’s Next: House Speaker Nancy Pelosi said Thursday that “we are just about there” on a stimulus deal that will include direct payments to Americans.
—Ben Walsh
***
Choppy Outlook for Travel, Movie Theaters
Investors got an update on how airlines and the movie business—two Covid-19 ravaged industries—are faring. The answer seems to be still not great.
- American Airlines lost $2.8 billion during the third quarter, while Southwest Airlines trimmed its losses to $1.2 billion from its $1.5 billion second-quarter loss. Both companies beat consensus estimates for revenue and their adjusted losses per share were narrower than expected.
- Southwest will start putting passengers in middle seats starting Dec. 1, the company said. Company execs said during the earnings call that there’s scientific evidence showing it’s safe to unblock the middle seats. The company estimated the cost of blocking the seats was roughly $20 million in September.
- The movie industry, too, faces a choppy recovery, AT&T’s CEO John Stankey said Thursday. He added that he’s not optimistic about the business and that AT&T’s WarnerMedia might have to find new ways to distribute its content after its Tenet release.
- Despite the pain in its pandemic-hit television and movie businesses, AT&T reported in-line earnings and stronger-than-expected revenue Thursday morning, earning 76 cents share on $42.3 billion in revenue.
What’s Next: For the airline industry, demand seems unlikely to rise to pre-pandemic levels until a vaccine is widely available. The movie business, meanwhile, is trying to lure consumers back now. But even with theaters open in the vast majority of states, it’s a tough sell.
—Ben Walsh
***
Judge Amy Coney Barrett One Step Closer to Supreme Court
The Senate Judiciary Committee voted 12-0 Thursday to recommend Judge Amy Coney Barrett for a full Senate vote on her nomination.
- All 12 Republicans on the committee voted in favor of Barrett, while the 10 Democratic senators boycotted the vote on the grounds that it was being rushed weeks ahead of the election.
- The vote paves the way for Barrett to be confirmed in the Senate where Republicans hold a 53-47 majority.
- If confirmed, Barrett would shift the balance of the Supreme Court to a solid conservative majority. As the fifth woman ever to join the high court, she would also become the sixth Catholic currently on the bench.
- Democrats fear the ramifications of that shift. The court is expected to hear a challenge to the Affordable Care Act shortly after the election. “I’m not here on a mission to destroy the Affordable Care Act,” Barrett told the committee during her testimony last week.
What’s Next: The Senate is expected to hold a final vote on Barrett’s nomination Monday. According to The Wall Street Journal, Senate Majority Leader Mitch McConnell could hold the chamber in session over the weekend to limit the opportunities for Democrats to stall the vote.
—Ben Walsh
***
Swift European Recovery Cut Short by Strength of Second Wave
The strength of the Covid-19 pandemic in Europe is about to bring to an end the swift recovery of the region’s economy during the summer months, as shown by a string of indicators published Friday.
- Retail sales in the U.K. rose for the fifth consecutive month, in September, up 1.5% compared to August, on the back of strong demand for furniture and supermarket sales. This was higher than the most optimistic of analysts forecasts. British households spent 4.7% more last month than they did in September, 2019.
- Looking ahead, a string of surveys throughout Europe show businesses already registering a slowdown due to the restrictions ordered to counter the coronavirus spike. IHS Markit flash purchasing managers indexes for services fell in October in the U.K. and the eurozone, more than generally expected.
- Some major European companies, such as car makers Renault and Daimler Benz or spirits group Pernod Ricard, published results in the last days showing a strong resumption of sales in the quarter ended in September, but warned about the gloomy months ahead.
What’s Next: Europe’s economic rebound was stronger than expected, but then so was the severity of the second wave. The EU and the U.K. now face long months waiting for elusive growth, while restrictions get increasingly tougher. And Britain leaving the union for good on Jan. 1 will worsen the slump.
—Pierre Briançon
***
Do you remember this week’s news? Take our quiz below and tell us how you did by emailing thebarronsdaily@barrons.com.
1. Goldman Sachs agreed to pay a nearly $3 billion fine, reclaimed $174 million in compensation from executives, and admitted wrongdoing regarding an investment fund in which country?
a. The Philippines
b. Indonesia
c. Thailand
d. Malaysia
2. Amid pandemic restructuring, Coca-Cola said it will discontinue its first diet soda, launched in 1963. What is its name?
a. RC Cola
b. Mr. Pibb
c. Tab
d. Nehi Grape
3. Alibaba announced plans to pay $3.6 billion to take control of which company that operates more than 480 supermarket-department stores in China?
a. Wumart Group
b. Sun Art Retail Group
c. Yonghui Superstores
d. Shanghai Bailian Group
4. The first U.S. mission to bring back an asteroid sample gathered primordial grit on Tuesday, 200 million miles away. What is the name of the mission?
a. Osiris-REx
b. Cosmic Background Explorer
c. Stardust-NExT
d. Radiation Belt Storm Probes
5. Intel reached a deal to sell its flash-memory manufacturing business to which company for about $9 billion?
a. SK Hynix
b. Micron Technology
c. Qualcomm
d. Texas Instruments
6. The Justice Department filed an antitrust lawsuit against which technology company on Tuesday for the alleged use of anticompetitive tactics to preserve a monopoly?
a. Apple
b. Facebook
c. Amazon
d. Google
Answers: 1(d); 2(c); 3(b); 4(a); 5(a); 6(d)
—Bonnie Bennett Slater
***
—Newsletter edited by Stacy Ozol, Anita Hamilton, Mary Romano, Matt Bemer, Ben Levisohn
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