Intel Upgraded on Strong PC Demand

Intel (INTC) shares are getting a boost from Thomas Weisel Partners analyst Kevin Cassidy, who Wednesday raised his rating on the stock to Overweight from Market Weight. He also raised his GAAP EPS estimates on the company to $1.18 from $1.10 for this year, and to $1.52 from $1.28 for next year. The Street sees $1.20 this year, $1.49 next year.

Cassidy sees two trends boosting Intel: strong PC demand, and stumbles by its primary rival.

Cassidy writes this morning that 2008 PC demand could exceed expectations, driven by emerging markets. He says Q4 PC notebook shipments are limited by supply constraints on certain components, including panels, batteries and keyboards, and that demand should overflow into the first quarter, producing better than seasonal demand and potentially better-than-expected earnings for Intel.

Meanwhile, he says that the company has a better processor lineup right now than Advanced Micro Devices (AMD) in servers, desktops and notebooks. “It now appears to us AMD may not have a competitive alternative to Intel’s barrage of 45-nm CPUs through 2008,” he writes.

In fact, Cassidy Wednesday cut his outlook for AMD for 2008: he now sees revenue of $6.6 billion, down from $6.4 billion, with a loss of $1.75 a share, widened from a previously expected loss of $1.70. He maintains a Market Weight rating on AMD. The estimate cut, he writes, reflects a belief that “AMD’s 65 nm process and/or architecture continues to generate poor yields limiting the introduction of higher performer server, desktop and notebook CPUs. Adds Cassidy: “AMD’s lack of execution in the process node transition could potentially lead to significant market share loss in 2008.”

Wednesday, INTC is up 75 cents, or 2.9%, at $27.06; AMD is unchanged at $9.25.

Comments

[Al Capital]

There was never any serious question about AMD "competing" with Intel, even if they designed a better chip, simply because in the actual manufacturing phase, AMD could not implement such designs efficiently. We highlighted Intel in August, specifically their awesome manufacturing capabilities.

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