There's nothing quite like seeing a fairly decent unrealized gain built over the course of 3 years evaporate in a few short (but hellish) weeks. This describes my experience with holding shares of Intel (NASDAQ:INTC). Now, truth be told, I'm not particularly happy about Intel as an investment, nor am I happy with some of the very real missteps on the part of Intel's product teams that have cost investors very real money.
However, the real reason that I'm not happy is that the shares are likely to underperform the market and many of its semiconductor peers over the next quarter. Why don't I sell, you ask? Well, the truth is, I've made it very clear to my readers what I'm waiting for and under what conditions that I plan to sell and I'd really like to stick to that.
Anyway, for those of you staying aboard the Intel pain-train (or for those of you thinking of boarding it), I'd like to let you know what I think the next couple of months are going to look like (of course, this comes with no warranty, expressed or implied, and really just represent the views of somebody who probably spends way too much time thinking about this company/stock).
Mobile World Congress Likely To Break Some Hearts
The next "big" catalyst that I've seen many Intel investors excited about is the upcoming Mobile World Congress. There seems to be this view that Intel may surprise and even announce some meaningful design wins with its upcoming "Merrifield" platform. Now, I personally think that this platform will be a bust, but there is no doubt that some will be expecting miracles.
At the end of the day, what I expect from Mobile World Congress, is that the rest of the mobile world (LG (OTC:LGEIY), Samsung (OTC:SSNLF), HTC (OTC:HTCKF), etc.) will all announce handset designs using Qualcomm (NASDAQ:QCOM) processors, with maybe a few bones thrown the way of Broadcom (BRCM) and NVIDIA (NASDAQ:NVDA) (since both of these players have announced credible, integrated modem + apps processor solutions), but there will be little-to-no traction from players that matter with Intel's Merrifield (no integrated radio, no dice for a dual core mid-range part).
The Next Earnings Report Will Likely Be Ho-Hum
Intel hasn't reported a "great" quarter in a long time and I see no reason to expect that Q1 will be any better. It'll probably come in-line on the top line (i.e., midpoint of guide), beat slightly on gross margins (60% against 59% midpoint), and probably find a way to lower its effective tax rate from what it had expected at the Q4 earnings release.
I see no catalysts to drive major upside to these numbers, with the weakness in enterprise server spending offsetting any potential "optimism" that will be had from PCs. Intel won't be recognizing squat from tablet/phone sales, and it's unlikely that XMM 7160 (the company's discrete LTE modem) will gain much traction given how limited of a solution it is compared to Qualcomm's silicon. XMM 7260 doesn't really hit until 2Q 2014, and even then it'll probably be closer to the tail end of the quarter if not a slip into Q3 to be paired with Moorefield (Merrifield successor).
Intel Is Unexciting Today
Until Intel launches some products in mobile that it can actually recognize revenue from, and until management can prove that it can more accurately forecast datacenter group demand growth (they've been wrong for years now), I really see very little reason to be terribly optimistic about the shares right now.
The second half of the year could be very nice if PC demand comes back, the 14nm ramp goes smoothly, Merrifield/Moorefield/Bay Trail/Cherry Trail/XMM 7260 make good inroads into mobile, and datacenter group sales grow >10% y-o-y, but there's a lot of "ifs" here.
At the end of the day, investors have no real reason to buy Intel shares right now. There will be time to buy in when the company's mobile execution turns a corner, and there will be time when PC demand shows a very clear sign of bottoming (rather than simply being artificially propped up by corporate desktop refresh). Until then, the best strategy for this stock is to play the tight $22-$25 range that it is likely to be stuck in for at least another quarter.
Disclosure: I am long INTC, BRCM, NVDA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.