10-year highs for Intel as Street applauds PC health, margins

"Historically, Intel stock has good correlation with gross margins and Intel gross margins which peaked in the mid 60's and may climb to 63% to 65% again in 2014/2015," writes Roth's Krishna Shankar, one of three analysts to upgrade Intel's (INTC +6.8%) following its guidance hike.

On top of boosting revenue guidance, Intel has hiked its Q2 gross margin forecast by 100 bps to 62%-66% - up from a Q1 level of 59.7%.

Shankar notes Intel's blended ASPs have been rising the last 8 quarters due to Ivy Bridge/Haswell launches, manufacturing efficiencies, enterprise/emerging markets strength, and a "lack of competition in PC and server markets from a weakened AMD." He is, however, worried Intel's server CPU "quasi-monopoly" could be challenged by upcoming ARM server CPU launches.

Some of those with a less enthusiastic take on Intel's numbers, such as Nomura, argue business PC sales are getting a temporary boost from Microsoft's decision to end Win. XP support (sparking upgrades), and that consumer PC demand is still soft.

In response, Credit Suisse argues that even if 70% of Intel's Q2 upside came from corporate demand, it would only equal 5% of the XP base. It sees the 2H launch of Intel's Grantley server CPUs (previous) providing further EPS upside.

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Comments (2)
  • techy46
    , contributor
    Comments (11498) | Send Message
    60% plus margins on every $700 million pop in revenue can really start to add up.
    15 Jun 2014, 10:01 PM Reply Like
  • Ashraf Eassa
    , contributor
    Comments (9710) | Send Message
    Love it.
    16 Jun 2014, 06:41 PM Reply Like
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