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Intel: Street Keeps Cutting Estimates As Earnings Loom

This article is more than 10 years old.

Intel estimates continue to ratchet lower ahead of the company's Q3 earnings report next Tuesday.

As noted in a previous post, Bernstein Research analyst Stacy Rasgon has cut his rating on the stock to Underperform from Market Perform, with a new target of $20, down from $24. His big concerns is that the company's ASPs are likely to shrink in coming quarters.

But he's not the only one ragging on the stock this morning.

  • Nomura analyst Romit Shah this morning cut his Q4 EPS forecast to 52 cents a share, from 55 cents; for 2013 he now sees $1.85, down from $2, and well below consensus at $2.23. He says the primary issue here is gross margin, which he sees falling to 60.5% in Q4 and 59.3% in 2013. He also sees the company's cash balance shrinking to $3 billion in Q4 2012 from $10 billion in Q2, due in part to a $3 billion investment in ASML. "Higher inventories and a weak PC market will likely impact utilization over the next six to nine months," he writes. "Intel could opt to shut down some older technologies to accelerate the next technology node migration, or mothball some new capacity. In either case, we expect the company to reduce utilization to manage inventories, which increased to 90 days in Q2 from 72 days in the year ago period." Shah keeps his Reduce rating and $22 target price.
  • Baird analyst Tristan Gerra today made a similar move, cutting gross margin expectations for Intel. "Given our belief the Windows 8-related ramp is mostly done and ahead of a seasonally weak 2013 first half, Intel has no reason to maintain high inventories internally and likely started to cut utilization rates to bring inventories back to normal levels, which will negatively impact gross margin," he writes. "While notebook shipments surged in September, end-demand remains weak. We see few catalysts for the stock near term; however, valuation appears attractive and any rebound in PC growth rates would be incremental." For 2012, he chops his EPS forecast to $2.04 a share from $2.20; for 2013, he goes to $1.90, from $2.30. While he keeps his Outperform rating on the stock, his target drops to $26, from $32.
  • FBR Capital analyst Craig Berger sees risks in the coming earnings period for not just Intel but all players in the PC food chain. "In the PC space, the total absence of any back-to-school or seasonal Q3 demand is causing finished goods to pile up, and is thus backing up inventory stockpiles of components, hard drives and others," he writes. "We also hear of poor initial feedback for Win8 devices, with any inventory overhangs likely muting the Win8 launch. While PC chip stocks are already low, there seem to be no identifiable catalysts in place for some time to come, with Intel and Advanced Micro Devices at obvious risk here. Further, LSI and Marvell, both with about 40% of revenues tied to hard drives, could be at moderate risk, though we think both firms embedded some PC weakness into guidance."

INTC is down 47 cents, or 2.1%, to $22.05.