Friday, November 30, 2012

Intel Corporation (NASDAQ:INTC) estimates being downgraded on weak demand for chips

The personal computer segment is seeing weak demand and the Street expects the sluggishness to continue. This has led to Intel Corporation(NASDAQ:INTC) estimates being trimmed.

For instance, Citigroup's Glen Yeung lowered his expectations for the company's fourth quarter results on Thursday.

When announcing the results for the third quarter, the chipmaker had forecast a 0.7 percent revenue growth sequentially, well below the seasonal growth of 3.2 percent in that quarter.

Yeung has however cut his estimates to the lower end of Intel's forecast range and well below the consensus estimates. According to him “Notebook ODM data has been noticeably weak, down 5 percent month-over-month in October (vs. expectations flat-to-up) and likely down again in November.”

According to Yeung's estimates, Intel's ODM notebook shipments in the fourth quarter will be down 2 to 5 percent sequentially, with the company getting very little support from Windows 8 notebooks, since there is weak demand for current touch models.

Intel shares have slid about 14 percent since September 2, while the benchmark S&P 500 has risen 1 percent.

James Covello of Goldman Sachs slashed his target price for Intel to $16 from $20, having already had a Sell rating on the stock.

According to Covello, the company's gross margins are likely to come under pressure due to excess supply. Both Intel and Advanced Micro devices have an inventory backlog while Intel is also adding to capacity. All this will put a downward pressure on chip prices.

Covello now sees 2013 profits of $1.60 a share, down from $1.70; for 2014, he goes to $1.90, from $2.05.

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