Investors will be impressed with the top line and gross margin of Intel Corporation (NASDAQ:INTC) over the next 4 to 6 quarters, believe analysts (Mark Lipacis, Sundeep Bajikar, Delos Elder) from Jefferies. Analysts noted that investment in computers/hardware in the United States as well as globally has been low, but “wonder if a cyclical investment cycle in PC/Server Hardware is nigh.”
Positives for Intel
According to analysts, a positive for Intel is $60 billion in investment that Intel has made over 3 years to design products like tri-gate transistors, which gives it superior, low-power transistors compared to those made for ARM CPU vendors by TSMC. Analysts believe “It does not allow for cyclical investment patterns for hardware needed to support the existing, entrenched enterprise architectures.”
Intel Corporation (NASDAQ:INTC) has manufactured a lower-power version of Haswell and Baytrail for the cheaper 2-in-1 notebooks segment and for tablets priced under $100, which will counter the losses in the computing device market.
Intel gains an edge over low cost, low power MPUs on the back of research and development and Capex spending over the last three years.
PC shipment decline
Analysts noted that PC year-on-year spending may have declined using the Gartner forecasted shipment from enterprise-heavy Dell and HP as a proxy.
PC shipments in the third quarter declined, but fared above IDC and Gartner reports by 200 basis points due to corporate spending. Gartner has not released its report on enterprise PC shipments for the third quarter yet. Analysts have used enterprise-heavy Dell and HP as a proxy to prove that “enterprise PCs may have bottomed in 3Q.”
Investment by United States users of computers and peripherals has been below the trend for a decade, and globally it has been below trend for three years.
Upside and downside scenario for Intel
According to analysts, if lower priced Windows 8 and longer battery life MPUs can bring in more sales than expected for the Wintel Platform, it will be a positive for Intel Corporation (NASDAQ:INTC). Also, the upside will be very likely if Intel’s market share in tablets increases at a faster pace than expected in 2014. Intel Corporation (NASDAQ:INTC)’s wining smartphone designs and development of a major android tablet could also act as a catalyst.
Additionally the downside that analysts think is a risk to the price target are the increase in the tablet cannibalization of PC, mis-execution of 14nm process ramp and gross margin coming in lower due to underutilization.
Analysts have assigned a Buy rating to Intel Corporation (NASDAQ:INTC) with a price target of $30.
