- Intel (INTC -8.5%) has received a mixture of target hikes and cuts (and no downgrades) after posting a Q4 beat, providing above-consensus sales guidance (aided by the Altera acquisition), and reporting weaker-than-expected Data Center Group (DCG) sales growth. Nonetheless, shares have dropped below $30 for the first time since October.
- Aside from DCG's performance, analysts have voiced concern about earnings call remarks (transcript) indicating Chinese demand, as well as Asian demand in general, is soft among both consumers and enterprises. CEO Brian Krzanich: "I would say [the weakness] is a little bit heavier on the client-side, so the PC side than the data center side, but we are seeing some of it on the data center side as well..."
- Goldman's James Covello (Sell rating): "Intel noted that organic 1Q trends are at the low end of seasonal, primarily due to weaker demand in China in consumer and enterprise PCs, which in turn drove higher internal inventory; We believe investors will be focused on whether DCG growth can return to the mid-teens target range after three quarters of sub-15% [Y/Y] growth..."
- Bernstein's Stacy Rasgon (Market Perform): "We had already believed “mid-teens” growth targets for DCG are optimistic, a point of view that seems to be gaining credibility given the company’s commentary on end demand. And of course PCs still don’t look great either ... Our estimates go up, but the drivers are low-quality, and purely non-operational (exclusion of amortization, a lower tax rate, and the aforementioned accounting games)."
- MKM's Ian Ing (Buy): "Intel has turned more cautious on growth since the November analyst day, particularly given uncertain China ... This not only affects client computing but data center as well, as management affirmed only double-digit growth for this segment instead of a mid-teens target."
- Rosenblatt's Kinngai Chan (no rating): "While the current demand climate remains soft due to uncertainty in the emerging market regions, we believe Intel could begin to outperform starting from 2Q16 mainly due to product cycle refresh in both the Datacenter and the PC client segments."
- Also mentioned on the earnings call 1) Krzanich argues growing sales to the telco/networking market (where Intel has less than 10% penetration, and where NFV growth is providing a lift) will help DCG deliver double-digit 2016 growth. 2) PC CPU ASPs benefited from higher sales of Intel's Core i7 and gamer-focused K-series CPUs. 3) Over 40% of server CPU volumes for cloud clients involved custom SKUs. 4) Memory sales rose over 20% Y/Y.
- Prior Intel coverage