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Intel near $35 as investor meeting reactions arrive; JMP upgrades (updated)

Nov. 20, 2015 12:06 PM ETIntel Corporation (INTC) StockBy: Eric Jhonsa, SA News Editor10 Comments
  • JMP's Alex Gauna has upgraded Intel (NASDAQ:INTC +1.6%) to Outperform and set a $45 target a day after the chip giant guided at its 2015 investor meeting for mid-single digit 2016 revenue growth, hiked its dividend by $0.02/share, and set a $10B 2016 capex budget. Shares are close to their highest levels since January.
  • During his presentation (.pdf), CFO Stacy Smith guide for mid-teens Data Center Group (DCG, server CPUs/network processors) 2016 revenue growth, in-line with the 4-year CAGR forecast Intel provided last year (aided by Altera?). The Client Computing Group (CCG, PC/mobile CPUs) is expected to see flat to low-single digit sales growth, with low-double digit op. profit growth due to improved mobile CPU profitability.
  • Gross margin is expected to benefit from higher ASPs, and be pressured by 3D XPoint investments and 10nm start-up costs. Notably, Intel expects only 1/3 of 2016 DCG revenue to come from traditional enterprise server sales. 1/3 are expected to come from cloud service providers (Amazon, Google, Facebook, etc.), and 1/3 from HPC, workstation, networking, and storage systems. The CCG outlook assumes a slight decline in PC unit sales.
  • Sterne Agee's Doug Freedman (Buy): "INTC highlighted non-consumer group segments make up 40% of total revenue in 2015 while contributing 65% of the operating profit ... Management noted the ongoing weakness in traditional enterprise market but continued to expect strong growth to be driven by robust demands in cloud service provider and high performance computing."
  • Freedman considers capex guidance better than feared. As does Cowen's Tim Arcuri (Market Perform), who also thinks gross margin guidance is conservative.
  • Roth's Krishna Shankar (Buy) is a little worried about the traction seen by ARM server CPU vendors AppliedMicro (AMCC -0.4%) and Cavium (CAVM -1.1%). "Beyond 2015, we believe that Intel’s quasi-monopoly in high-margin servers (95% market share in server platforms) may be challenged by new low-power ARM-based server platforms for the high growth cloud services, social networking/video-delivery market." Raymond James' Hans Mosesmann (Underperform) states CEO Brian Krzanich admitted Intel's server CPU forecast accounts for share "degradation."
  • SA author Bruce Burnworth is upbeat about DCG's growth outlook. Among other things, he notes Intel respectively sees $5B and $1.6B 2020 addressable markets for silicon photonics and Omni-Path, and a major opportunity to grow networking sales as carriers adopt network functions virtualization (NFV, involves migrating networking functions to software running on commodity hardware).
  • Intel's investor meeting presentations
  • Update: Some more Intel news: The company has named Murthy Renduchintala, until recently co-president of Qualcomm's chip units (QCT), the president of a newly-formed client and IoT businesses and systems architecture group. The new unit "brings together Intel's Platform Engineering, Client Computing, IoT, Software and Services, and Design & Technology Solutions groups."

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