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Intel (NASDAQ:INTC), which primarily competes with AMD (NYSE:AMD) in the server and notebook processor market, reported one of its best quarterly performances ever for the second quarter of 2010. Intel’s strong revenues were driven by global PC sales, which have revived this year after a very slow 2009.

Trefis forecasts that the global PC market will grow by 10% in 2010. This assumption is built into our $24.78 estimate for Intel’s stock value. On the other hand, market research firm Gartner predicts that PC sales will increase by 20% this year. If Gartner’s more optimistic forecast were to materialize, it would create a potential upside of 9% to our price estimate for Intel. Our analysis follows below.

Retail and corporate demand drive PC sales growth

We expect strong retail demand for PCs in both emerging and mature markets this year. The bulk of this growth will come from mobile devices such as notebooks and netbooks. PC World magazine reports, citing Gartner research, that mini-notebooks will continue to boost mobile PC sales in 2010. Going forward, mini-notebooks face significant competition from low-voltage ultraportables and next generation tablet devices.

The corporate IT replacement cycle will also drive PC market growth this year. As the global economy recovers, companies are starting to invest in their IT infrastructures. Moreover, the U.S. public sector generates healthy seasonal demand for PCs and notebooks.

Upside to Intel from additional 20% growth in global PC sales

We currently forecast 10% growth in global PC shipments in 2010. We expect 15% growth in notebooks, 30% growth for netbooks and a 1% decline for desktop PCs. These forecasts are currently priced into our $24.78 estimate for Intel’s stock.

However, if Gartner’s forecast of 20% global PC shipment growth in 2010 were to materialize, it would produce significant growth in notebook sales and possiblymild growth in desktop sales. This scenario implies an additional upside of around 5% to 9% for Intel’s stock price.

Disclosure: No positions

Source: Intel's Stock Price and the PC Refresh Cycle