Monday, October 09, 2006

Calls of Note Part 2

Two firms comment on Intel (NASDAQ:INTC) over the weekend:

- Prudential thinks that Intel MPU shipments came in at above seasonal rates for the SepQ, but that these were partially offset by a more challenging ASP environment during the quarter.

As a result they are raising Q3 revenue estimate to $8.6 billion from $8.3 billion, and EPS estimate to $0.19 from $0.17.

Firm's PC Hardware team's analysis indicates PC unit growth to slow to 6% in 2007 from 10% in 2006. They also think that Intel will lose share to AMD at Dell, translating to about 4% of the market. Firm is modeling 2% PC unit growth for Intel in 2007. They are raising their 2006 EPS estimates (including options expense) to $0.79 from $0.75, but lowering their 2007 EPS estimate to $1.05 from $1.07.

Firm notes they remain concerned about MPU capacity and pricing for the PC-MPU industry in general, and share loss and margins for Intel specifically. Remains Underweight on Intel with a $16 price target.

- JP Morgan is raising the White Flag....and Intel estimates. Their checks indicate Intel experienced upside in both its processor and chipset business in the September quarter and as a result they believe the company grew its revenues above the mid-point of its guidance for a 4%-11% QoQ increase and above firm's prior estimate of up 6% QoQ.

While they are positive on the share gains, they believe most of the upside was from lower-margin low-end processors and chipsets. As a result, firm's 3Q06 gross margin estimate of 48% remains below company guidance of 49%.

Although they are raising estimates on Intel, the firm remains Neutral on the stock due to belief that gross margins should remain in the high-40% range through 1H07 due to record inventory, aggressive pricing, and higher depreciation.

As a result, they raising C06 revenue and EPS estimates from $34.7 billion and $0.71 to $35.0 billion and $0.74. Firm is maintaining C07 revenue estimate of $37.0 billion, but is slightly increasing EPS estimate from $0.90 to $0.94. They note their C07 EPS estimate of $0.94 is well below Consensus of $1.10.

Maintains Neutral.

Notablecalls: So while Q3 results will be moderately OK due to BTS seasonality, the views on 2007 are growing more negative. I still think INTC is a sell around current levels.

No comments: