Intel Corporation (NASDAQ:INTC) will report its first quarter earnings after the market close on April 15. Goldman Sachs analysts James Covello, Gabriela Borges and Chelsea Jurman, in a report dated April 10, 2014, expect the chip maker to post sales above the guidance range of $12.8 billion (mid point), which is a 7% decline quarter over quarter.
Intel expected to give in-line or below Q2 guidance
Analysts expect Intel Corporation (NASDAQ:INTC) to provide in line to marginally below guidance for the second quarter. For the second quarter, consensus estimate is a growth of 1% quarter over quarter for sales, and gross margin is expected to improve by 80bp quarter over quarter.
Analysts believe a “lackluster guidance will likely stand out in an environment in which most semis post beat-and-raise quarters.”
Generally, for the second quarter, the sales grow by 1% quarter to quarter. Also, the analysts expect the PC demand from corporate to decline as Microsoft has stopped the support for Windows XP on April 8. Sales growth for datacenter is also expected to be moderate, and much of the growth will be due to stable enterprise spending.
Items to watch for in Q1 earnings report
Goldman Sachs analysts have listed a few topics of focus like catalysts for gross margins for 2014 considering rising depreciation compared to guidance of strong margins, in the second half. Updates on capital expenditure will also be a must-watch item as Intel Corporation (NASDAQ:INTC) has been investing around 2 times the depreciation amount. More information will be welcomed on the expected sales growth for datacenter in the second half of the year, considering the launch of Grantley servers later in 2014. Investors and analysts would also look for the details on the company’s mobile strategy.
Intel Corporation (NASDAQ:INTC) stock has been impressive in the last two weeks, gaining over 6% compared to -1% for SOX. Analysts note that 15 of the last 17 quarters, the chip maker have rallied before earnings, but for the same period has returned significantly lower; only 32% compared the S&P 500's 68% and SOX's 61%. Such underperformance, according to analysts reflects that rallies fade away after posting earnings.
Goldman Sachs analysts have a Sell rating on Intel Corporation (NASDAQ:INTC) with a price target of $16, which is based on 9X normalized EPS of $1.80. Analysts believe that the consensus view is “overly optimistic” on the chip maker considering the structural challenges in PCs and record capex.