A Contrarian Bullish Call on the PC Vertical

Avian Securities is out with an interesting call, saying that heading into the seasonally slow part of the year, it is easier to be negative on the PC vertical and Intel (NASDAQ:INTC) as few positive catalysts are likely to develop. Over the last several days, they believe slower than expected European Notebook sales from DSG and earlier weaker Acer sales were used as rationale by several firms for being negative on the PC vertical.

Avian disagrees. More importantly, their data from each of the major PC subcomponents suggest that pricing is stable, inventories are low, demand in Q4 was strong, and the PC vertical is in good shape heading into this seasonally slow period. Specifically, microprocessor inventories for both INTC and AMD have dropped to recent lows with stable pricing, drive demand and pricing has been very good for many months, panel availability especially on the monitor/notebook side has been very tight longer then they had expected even with panel manufacturers operating at full capacity, and even DRAM commentary from both manufacturers and dealers suggest that unit demand was good this Q4 vs last year rather oversupply was the culprit behind the DRAM debacle.

WDC pre-announced positively in early December and the firm expects STX to reiterate their positive comments next week; HPQ if you recall had a positive analyst day in mid December. While the first half of every year is weaker and this year will not be different and while they acknowledge the macro risks of higher oil prices and the sub prime meltdown, Avian wants to emphasize the strength they are currently seeing across the PC vertical and suggest that low inventory levels, further into December and the new year than in previous years, will extend this strength into Q1 and relieve some of the typical seasonal slowdown.

Firm continues to like INTC, STX, WDC, GLW, PHTN, HTCH, and XRTX.

Notablecalls: Well, I think it's quite clear we're heading for a bounce on Monday and Avian's call on some of the major tech names fits in there. A contrarian call, I'd say!

Related: Intel Corporation: A Newly Reborn Monopoly

Comments

[Shameless Ko]

GS, MS, BSC all need to upgrade INTC right now. Period. Bank of America and JPM should be ashamed of what they did, downgrading INTC twice in a week, especially on the day of weak jobs data.