Intel Likely To Benefit From PC And Tablet Sales Growth

Jul. 9.14 | About: Intel Corporation (INTC)

Summary

Intel expected to report second quarter revenue of $13.7 billion.

Revenue up on increased PC sales.

Tablet sales trending up.

Intel (NASDAQ:INTC) will announce its second quarter earnings on July 15. The technology company reported revenue of $12.8 billion and earnings per share of $0.38 in the first quarter of 2014. Analysts estimate revenue in the second quarter of 2014 will be $13.68 billion with EPS of $0.52.

On June 12 the company reported in a press release that it would be increasing its outlook for the second quarter of 2014 and entire year. It increased its second quarter revenue target to $13.7 billion from $13.0 billion. An industry increase in PC unit volume sales drove the target sales revenue higher.

Its main business segments include PC Client, Data Center, Internet of Things, Mobile & Communications and Software & Services. In the first quarter of 2014 PC Client contributed the greatest amount to revenue at 62% and $7.941 billion.

Technology companies in the industry are reacting to an increase in PC sales primarily from businesses. A recent Wall Street Journal article reported on the positive momentum technology companies are seeing. The report indicated that increased PC sales could be caused by a micro-trend occurring in the industry. The industry upgrade requirements causing the current increase in demand could however lead to stronger overall PC sales growth according to research firm Gartner which reports strengthening in the PC market on a broader level over the long-term.

Meanwhile the technology industry continues to see a surge from personal consumers in tablet sales which is also likely to help Intel's Mobile & Communications unit. Research firm Gartner recently reported that tablets are likely to match sales of PCs in 2014 and surpass PC sales in 2015.

Overall Intel continues to remain well positioned in the technology industry. Year-to-date its stock has returned 18.63%. It has a one-year price target1 of $31.42 and at $30.79 it appears to have some upside potential, specifically given analysts high target consensus of $40. The currently upgraded outlook on the PC market and growth in consumer tablet sales help to make this stock a good buy for new investors and solid hold for current owners.

1 The price target is derived from Bodie, Kane and Marcus' intrinsic value formula. The intrinsic value formula discounts the stock's projected one-year future cash flow by the risk-free rate on the one-year Treasury note and includes adjustments made for specific market assumptions including the stock's beta and market risk premium.

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