Intel rallies; Goldman thinks Q4 sales could top guidance midpoint

Though reiterating a Sell and $16 PT on Intel (INTC +1.5%), Goldman's James Covello thinks the chip giant's Q4 sales will beat its guidance midpoint ($13.7B, nearly even with a $13.72B consensus) when it reports on Thursday.

Maxim's Ashok Kumar made a similar prediction two weeks ago, while citing "upside seen in PC builds/shipments and data center demand."

Covello says a talk with president Renee James (appointed last year) was "the most open, engaging and friendly strategic dialogue we have had with [Intel] in 10 years,"  and left him with a much better grasp of Intel's strategy (though it still disagrees with parts of it).

He thinks Intel's new management is "more open to differing perspectives and is more attuned to market dynamics," and is looking to use its mobile processors to increase utilization rates (and thus margins).

At the same time, Covello believes Intel is better off focusing on its budding foundry business (where its manufacturing lead gives it an edge) than on mobile, and continues to think its "core advantage is in segments that require high processing power," rather than low power consumption.

Previous: Goldman unhappy with Intel's 2014 guidance and capex budget

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Comments (10)
  • Quoth the Raven
    , contributor
    Comments (2063) | Send Message
    Love it. Went long last week for these 5 reasons:
    13 Jan 2014, 12:07 PM Reply Like
  • Micah
    , contributor
    Comments (500) | Send Message
    "Though reiterating a Sell and $16 PT on Intel...."


    Am I the only one who thinks this is completely idiotic??
    13 Jan 2014, 12:19 PM Reply Like
  • Chris Lau
    , contributor
    Comments (4284) | Send Message
    Typo? $26 seems more appropriate a target for (INTC). Look at (AMD) and how it's flying as it embraces growth areas (consoles). Intel needs to step it up with smartphones and tablet chips.
    13 Jan 2014, 12:41 PM Reply Like
  • i_am_seeker_2
    , contributor
    Comments (1913) | Send Message
    That is vintage Covello.


    He is a true ass.
    13 Jan 2014, 05:33 PM Reply Like
  • Russ Fischer
    , contributor
    Comments (3018) | Send Message
    Covello is entitled to think whatever he wishes.
    In order for foundry to be anything but a rounding error in Intel's business they would have to do foundry work for direct competitors such as Nvdia and Qualcomm. I don't see that happening. what I do see happening is progress in security, silicon photonics, and solid state drives that could double the Intel top line and more than double the bottom line.
    To hold a sell and a $16 price target on Intel tells me that he was insulted by someone from Intel in the past.
    13 Jan 2014, 12:21 PM Reply Like
  • Qniform
    , contributor
    Comments (4591) | Send Message
    I bet Renee turned him down for a date.
    13 Jan 2014, 07:13 PM Reply Like
  • kmi
    , contributor
    Comments (4744) | Send Message
    "Covello believes Intel is better off focusing on its budding foundry business"


    By which he is basically suggesting that INTC cede the mobile and embedded markets to ARMH, the strategy that had Otellini replaced and pushed INTC's share price under $20.


    Perhaps his price target is $16, but only if INTC follows his strategy of focusing on its foundry business and ceding the low power segment to the increasingly more competitive products from the ARM camp.
    13 Jan 2014, 12:29 PM Reply Like
  • markitos
    , contributor
    Comments (208) | Send Message
    It seems to me that James Covello (JC) is preparing his followers/shorts to spin INTC guidance beat as a failure so he can issue another downgrade from Sell to Strong Sell in case his new estimates beat is too small or the new guidance from management for 2014 is not as good as he thinks it should be. God forbid if Intel will exceed his "new" revenue guidance by much. In that case JC will bring class action law suit against the company for underestimating it revenues/earnings and causing significant losses to shorts.
    13 Jan 2014, 04:06 PM Reply Like
  • Mace Meier
    , contributor
    Comments (498) | Send Message
    James Covello, it seems, is able to absolutely control the price of this stock. I will never forget his downgrade of Intel on Friday, November 22nd.
    14 Jan 2014, 01:35 PM Reply Like
  • Hendershott
    , contributor
    Comments (1891) | Send Message
    The foundry business has to have lower margins than designing, producing and selling their own chips. Assuming they can sell those chips.
    14 Jan 2014, 08:34 PM Reply Like
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