Intel will need its revenue to surge by approximately 17% in the second half of 2015 to achieve its 2015 revenue growth target of flat year over year, according to a Citi research report. Analysts at the sell-side research firm believe the company may revise its EPS guidance downwards for 2015.
Intel guidance on the high side
Since 2010, the chip maker has posted an average of 5% rise in revenue, and in that time, it has never gone beyond 8% growth. According to Citi, Intel is too bullish on its second half fiscal year 2015 outlook, and that guidance will have to come down.
According to Citi analyst Christopher Danely, Intel is estimating strong growth in the third quarter of 2015 on the back of inventory replenishment due to the Windows 10 launch in the second half of CY15. Also it is expecting strong growth from its Data Center, IOT and NAND businesses to counterbalance the weakness from its core PC business.
However, he notes that the 17% growth guidance for the second half is over three times the 5-year average, and growth from Intel’s Data Center, Internet of Things (IoT), and NAND businesses may be unable to compensate for the weakness in Intel’s core PC segment.
Intel did lower its guidance earlier
In the March quarter, the company lowered its calendar year 2015 revenue guidance from up in the mid-single digits year over year to flat year over year. The chip maker lowered its margin guidance 100 basis points from 62% to 61% due to lower utilization rates. According to Danely, Intel’s previous revenue growth outlook rests on assumptions of almost flat YOY PC shipments, but since then, PC demand has come down.
Analysts expect revenue to come in at $54.3 billion and earnings per share to be at $1.97 for Intel during fiscal 2015. By comparison, the consensus estimate is $55.5 billion and $2.17 respectively.
Danely said, “Our analysis of C15 EPS estimates indicates Neutral rated Intel has 9% downside to C15 EPS Consensus estimates, well below our coverage universe average of 3% downside as we believe the company’s 2015 guidance is too aggressive.”
In a research note on Tuesday on the North American Semiconductor Industry, Citi said it has assigned a Neutral rating to Intel.