Intel Corporation (INTC): Citi Cuts Its Estimates, Evercore Downgrades

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Intel Corporation (INTC): Citi Cuts Its Estimates, Evercore Downgrades
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The stock price of Intel Corporation (NASDAQ:INTC) plummeted by 3.6 percent to $23.18 per share on Monday after analysts reduced their second quarter earnings expectations for the chip manufacturer, making it the biggest loser at the S&P 500.

Intel Corporation (INTC): Citi Cuts Its Estimates, Evercore Downgrades

Glen Young, analyst at Citi Research said that PC data points are worse than expected which prompted the research firm to cut its earnings estimate for Intel Corporation (NASDAQ:INTC) for the second quarter from $0.39 to $0.38 per share.

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Intel Downgraded By Evercore

On the other hand, analysts at Evercore Partners Inc. (NYSE:EVR) downgraded their rating for the stock of Intel Corporation (NASDAQ:INTC) from equal weight to underweight. The analysts also lowered their price target for the shares of the company from $22 to $20 a share.

Evercore Partners analysts Patrick Wang and Michael C. Lucarelli emphasized that they’ve been cautious on the long-term prospects of the chip maker for some time, and they cannot ignore their concerns about the business structure of Intel Corporation (NASDAQ:INTC). According to the analysts, the existing trends in the PC market are weakening and projected a 10 percent decline year-over-year this 2013.

Wang and Lucarelli perceived that the chip maker’s could face average sales price challenges as the company’s management capitulates on the PC client group and to some extent in the Data Center Group.

Reason For Intel’s Profit Drop

The analysts believed that Intel Corporation (NASDAQ:INTC)’s total profit could decline due to the combination of cannibalization and average sales price reduction even if its gross margins from atom processors are healthy. Wang and Lucarelli said they do not expect the company’s share gains in tablets and smartphones to be significant to its earnings per share (EPS) in 2014.

Wang and Lucarelli reduced their 2014 EPS estimate for Intel Corporation from $1.98 to $1.90. According to them, the company would not be able to achieve an earnings power of more than $2 over the next few years.

According to Wang and Lucarelli, the downside of the stock of Intel Corporation (NASDAQ:INTC) would be limited to such extent because it carries a 3.7 percent yield. The analysts also perceived an unfavorable risk-to-reward on the current level of the shares of the company. The analysts added that signs of fundamental inflection or strategic change appear to be more positive.

The analysts also said, “Clearly, things are in motion at Intel with CEO Krzanich reorganizing businesses, re-upholstering the core business, and carefully structuring foundry plans. Looking ahead, we believe the Fall Analyst Day could serve as a potential catalyst with new leadership sharing their vision and perhaps providing an update to the financial model.”

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