Earnings Watch: Intel and Citrix may benefit from coronavirus, but face same fate as Netflix

Earnings Watch

Earnings Watch: After Netflix stock sank despite huge quarterly results, Intel and Citrix are expected to disclose similarly positive reactions to stay-at-home orders

Intel Corp. was likely helped by a sudden need for work-from-home laptops and cloud power, but the rest of the year is uncertain heading into earnings.


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Does Intel Corp. have anything in common with Netflix Inc.? Investors are about to find out.

As coronavirus-related lockdowns swept the globe, many companies rushed to equip employees with remote-working tools and leaned on cloud services that let workers connect from afar. This may have given Intel’s
INTC,
+6.63%

PC and server-chip businesses a nice boost, but there are big questions about what the future holds once those initial purchases die down, especially as businesses try to navigate an uncertain economy.

See also: Intel could experience sales surge due to coronavirus, but ‘all bets are off’ after that

If Netflix’s
NFLX,
-2.86%

earnings were any indication, Wall Street may be not be that impressed with short-term coronavirus-induced spikes when the rest of the year is cloudy. Netflix proved it is a stay-home beneficiary Tuesday afternoon, posting its biggest subscriber gains on record, but shares were punished Wednesday on fears that future momentum will be more muted.

For more: Netflix doesn’t know what comes next after coronavirus-sparked boom in subscriptions

A strong quarter for Intel, and even a strong outlook for the June period, would likely be met with questions about whether demand has been “pulled forward” to the beginning of the year, creating greater possibility of a weaker second half.

While other companies benefiting from work-from-home trends could see a similar dynamic, the trend could be “even more exaggerated” for Intel, according to Bernstein analyst Stacy Rasgon, as the company modeled an “already odd” trajectory even before the outbreak hit, with projections for over-shipment in the first half of the year.

Read: Chip stocks rally as Texas Instruments provides first look into coronavirus impact on sector

Intel’s Thursday afternoon report will help paint a fuller picture of how the chip industry is faring during the pandemic, building on what Texas Instruments Inc.
TXN,
+4.81%

shared earlier in the week. Those results indicated that PC and server businesses remain resilient while the automotive and industrial categories face more challenges. Because Intel has a bigger and more varied business, its commentary could be even more illuminating for the semiconductor sector as a whole.

What else to watch for Thursday

• Citrix Systems Inc.
CTXS,
+3.44%

could have a similar story to Intel when it reports Thursday afternoon. Its shares have shot up 37% so far this year on the expectation of growing demand for its software, which lets workers access applications and other tools remotely. Jefferies analyst Brent Thill thinks the company could also be staring down a tougher second half and worries that even March-quarter estimates may “have gone beyond current fundamentals.” While analysts surveyed by FactSet are calling for $1.17 a share in adjusted earnings on $734 million in revenue, he said the buy-side seems to be looking for a beat-and-raise quarter.

See also: Citrix was one of 30 S&P 500 stocks to gain in disastrous first quarter

• Domino’s Pizza Inc.
DPZ,
+5.07%

has actually been hiring workers during the pandemic as the company still manages to grow sales. It indicated a 4.4% rise in same-store sales in a preliminary first-quarter update. Of interest during Domino’s morning call will be the performance of its overseas business: Wedbush analyst Nick Setyan wrote that about 13% of the company’s international locations were subject to temporary closures.

Read: Domino’s Pizza, Papa John’s to benefit from coronavirus-related restaurant closures, analysts say

• World Wrestling Entertainment Inc.
WWE,
-0.12%

faces risk across the board from the coronavirus outbreak, wrote Wells Fargo analyst Steven Cahall. He worries that the crisis “could reduce viewing of shows in empty arenas” and expects that WWE’s events business won’t resume until late in the third quarter. Cahall will be looking for more details on the afternoon call.

See also: WWE lays off wrestlers even after Florida deems pro wrestling ‘essential’

• Eli Lilly & Co.’s
LLY,
+2.64%

business may be “more resilient to COVID-19 pressures,” according to Mizuho analyst Vamil Divan, but he’ll still be listening Thursday morning for the pharmaceutical company’s breakdown of how the outbreak has impacted its various products based on how long they’ve been on the market, how they’re administered, and where they’re typically used.

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