Intel announced on its third-quarter earnings call plans to ramp up investments next year, and Wall Street does not approve. Three Wall Street firms downgraded the shares to hold from buy after the results, and several others cut price targets and estimates. The chipmaker missed on third-quarter revenue Thursday, citing an industry-wide component shortage. But more importantly to Wall Street, Intel also said its capital expenditures could total $25 billion to $28 billion in 2022. Analysts on average had expected guidance of $19.35 billion, according to StreetAccount. The semiconductor company is already in a period of massive investments, as it spends $20 billion this year — including on a new chip foundry in Arizona — to turn its struggling stock around. Intel shares were down 10% in premarket trading Friday. They came into the results already struggling, up just over 3% in 12 months. The S & P 500 is up 31% over the same period. Morgan Stanley downgraded the stock to equal weight from overweight. "This is a frustrating call for us; Intel is on the brink of a product turnaround," Morgan Stanley's Joseph Moore said. "The situation is mixed, but ultimately the capital spending requires underwriting a growth forecast that seems challenging." The firm also lowered its price target on Intel to $55 per share from $67 per share. The new price target is $1 below Intel's closing price Thursday. "We remain believers in the longer term turnaround in the core business, but with this level of investment that may not be enough to drive the stock to the highs we had envisioned," Moore added. UBS similarly downgraded the chip stock to neutral from buy, and cut its price target to $58 per share from $73 per share. "This higher capex and commentary about how long it will remain high pushes out the snap-back that we hoped for in 2023 on [free cash flow] to more like 2024/2025," UBS's Timothy Arcuri said. Mizuho also downgraded the stock to neutral rating from buy and slashed its price target to $55 per share from $70 per share. "We have been positive on INTC's ability to return to executing on its technology roadmap with new management. However, we now believe INTC's capital intensive Foundry shift adds uncertainty to its likelihood of catching up to leading-edge by executing on its core PC/Server roadmap," Mizuho's Vijay Rakesh said. —CNBC's Michael Bloom and Kif Leswing contributed reporting.
Intel employees walk by a sign as they enter their office in Santa Clara, California.
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Intel announced on its third-quarter earnings call plans to ramp up investments next year, and Wall Street does not approve.