These 2 Tech Stocks Both Fell 29% on Friday. Are They Buying Opportunities Now?
Two very different businesses with two very different problems, and one common thread.
Friday witnessed significant declines in two tech stocks, Intel and Reddit, both falling by nearly 29% following their latest earnings reports. Intel, a leading chipmaker, reported a 21% year-over-year revenue growth, reaching $16.5 billion, with its data center and AI segment showing exceptional growth of 78% to $7.3 billion. However, the company's fourth-quarter revenue outlook, expected to be between $15 billion and $16 billion, was significantly below the $17 billion anticipated by analysts.
The company also expects its adjusted EPS to drop to $0.25, compared to analysts' estimate of $0.43. Intel's gross margin is projected to fall to around 38%, a stark contrast to 44.1% in the previous quarter. The primary factor contributing to this downturn is the PC market, as AI data centers are consuming a substantial number of memory chips, leading to rising laptop and desktop prices.
Additionally, Intel anticipates a 12% decline in PC shipments this year and another 10% in 2027, exacerbated by a factory accident in Israel costing roughly $300 million in fourth-quarter revenue.
Meanwhile, Reddit, a social media platform, also experienced a 29% drop in its stock price after reporting a strong third-quarter revenue growth of 53% to $895 million, surpassing analyst estimates. However, the company's adjusted EBITDA increased by 70% to $402 million. Despite these impressive figures, Reddit's CEO, Steve Huffman, revealed that search engine traffic had significantly declined, falling by more than 1 million per week on average during October.
Google's AI mode is not driving traffic, as Reddit's search referrals dropped over the course of the quarter. U.S. daily users decreased by 2% to 50.7 million, and total daily users could potentially fall by a low-double-digit percentage this quarter. Reddit's profit guidance also fell short of analyst expectations. While both Intel and Reddit are priced lower than they were a week ago, their current valuations should not be mistaken for cheapness.
Investors should closely monitor the performance of their respective businesses to determine whether these one-day drops are mere overreactions or the beginning of a prolonged reset.
Written by urgent.news from Motley Fool's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
