By Arie Goren
On June 13, Intel Corporation (NASDAQ:INTC) raised its outlook for revenue and gross profit margin this quarter and the full year, showing better than expected sales volume of personal computers. According to Intel, the rising demand for personal computers is driven mostly by strong demand for business PCs.
The recent boost for PC sales comes after a noteworthy slump in PC sales, mainly due to the growing popularity of tablets. Being late to mobile, Intel has an ambitious program to gain market share in the strong growing mobile market. In the first quarter of 2014, Intel shipped five million tablet processors, making strong progress on its goal of 40 million tablets for 2014.
Welcome to our latest issue of issue of ValueWalk’s hedge fund update. Below subscribers can find an excerpt in text and the full issue in PDF format. Please send us your feedback! Featuring hedge funds avoiding distressed china debt, growth in crypto fund launches, and the adapting venture capital industry. Q3 2021 hedge fund letters, Read More
Intel’s higher forecast caused a massive reaction among analysts, with many deciding to re-establish their rating of the stock after the announcement. Let’s see how Intel’s new outlook for revenue and gross profit margin influenced analysts’ opinion. Since we wanted to eliminate all biased opinions, we have taken into account only recommendations from top analysts who have four or five star rating according to TipRanks, a website that ranks experts (analysts and bloggers) according to their performance.
According to TipRanks, there are 47 analysts covering Intel’s stock and 29 of them have four or five star rating.
Immediately after that Intel Corporation (NASDAQ:INTC)’s raised its outlook, sixteen top analysts published their latest recommendation on the stock; eight of them gave a Buy rating on the stock and eight analysts rated it as a Hold.
Topeka Capital’s five-star analyst Suji De Silva, who has 76% success rate, recommended buying Intel stock saying, “The higher forecast provides another hint of optimism in the PC industry, where Intel gets the majority of its revenue, after two straight years of declining global shipments. The chipmaker is getting a lift as businesses replace aging machines following the end of Microsoft Corp.’s support for its Windows XP software — a cycle that will continue into next year.”
De Silva has a 71% success rate recommending Intel Corporation (NASDAQ:INTC), earning +6.8% average return.
Drexel Hamilton’s five-star analyst Richard Wittington, who has impressive 90% success rate, raised his rating to Buy from Hold, with a $35 price target, up from $28, writing that the Intel news was, “A classic 2d week of June up guide.” Whittington raised his 2014 view to $56 billion in revenue and 53 cents per share from a prior $54.8 billion and 47 cents.
Wittington has a 100% success rate recommending Intel, earning +3.1% average return.
As opposed to these buy ratings from two five-star analysts, Nomura’s four-star analyst Romit Shah, who has 68% success rate, reiterated a Neutral rating, but raised his price target to $27 from $25, explaining, “The pace of Windows XP upgrades appears much faster than our expectations, but still unsustainable in our view. We estimate that there are roughly 20m commercial XP-based PCs that would require an upgrade as these PCs have passed the XP support cut-off date. The upside in the quarter implies upgrades of roughly 6-7m business PCs. We continue to believe that demand for consumer PCs (~45% of total PCs) will be challenged in the second half due to ongoing tablet cannibalization in China and share of wallet constraints in the developed regions. As such, we are forecasting revenue growth to decelerate into the low-to-mid single digit range in Q3 and flattish in Q4.”
Shah has a 0% success rate recommending Intel, losing a -2.5% average return on the stock.
In conclusion, Intel’s higher forecast is, without a doubt, good news for the company and, considering its leading position in the tech sector, it is also good news for the stock market as a whole. However, not all top-ranked analysts recommended the stock after that Intel’s raised its outlook; eight top analysts still ranked the stock as a Hold, while the other eight top analysts recommended buying Intel stock.