Still Expect A Large Cut To Intel Corporation (INTC) EPS Guidance: Citi
Citi presents a bearish review of Intel calendar 2015 (CY15) outlook, contends that 17% revenue growth is impossible in the present scenario
By: Larry Darrell
Published: May 5, 2015 at 4:10 pm EST
Citi predicts a large cut to Intel Corporation’s (NASDAQ:INTC) earnings per share (EPS) guidance for 2015 (CY15). The sell-side research firm also says the company requires roughly a 17% revenue growth in the second-half of 2015 (2HCY15) to hit its calendar year 2015 revenue growth target of flat year-over-year (YoY).
The research firm restated its Neutral rating on the stock. All of this, published in a research note on North American Semiconductors on Tuesday.
In response, the stock is trading down 1.78% at $32.6 as of 3:11 PM EDT.
Since 2010, Intel has been able to post second-half revenue growth of only 5% on average, says Citi. In that time it has never crossed 8% growth. The firm argues that Intel is too bullish on its 2HFY15 outlook, and guidance has to come down.
The sell-sider projects $54.3 billion in revenue and an EPS of $1.97 for Intel during CY15. By comparison, consensus estimates project $55.5 billion and $2.17, respectively. Citi analyst, Christopher Danely, says, “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.”
During the March quarter (1QCY15) earnings, Intel lowered its calendar year 2015 revenue guidance from up mid-single digits YoY to flat YoY of $55.9 billion.
Intel lowered its 2015 gross margin guidance 100 basis points (bps) from 62.0% to 61.0% due to lower utilization rates. Mr. Danely mentioned that Intel’s prior revenue growth outlook was based on assumptions of flattish YoY
Citi is always there with these types of articles. INTEL does not effectively or even ineffectively attempt to counter these types of specific charges by Citi. They seem to have taken the place of Covello and Nomura.
They have complete control of INTC and whipsaw it frequently for great profits. I wouldn't call them stupid since they are making huge bucks doing it. It appears Citi may be involved heavily in the control of the stock price.
based on assumptions of flattish YoY PC shipments in CY15. However, PC demand has now softened.
Danely added, “The company expects strong growth in 3Q15 driven by inventory replenishment due to the Windows 10 launch in second half of CY15. In addition, the company believes strong growth from the Data Center, IOT, and NAND businesses (combined roughly 42% of 1Q15 sales) will offset weakness from its core PC business (58% of 1Q15 sales).”
However, Intel’s guidance for around 17% growth in 2HCY15 is more than three times its 5-year average. The firm doesn’t believe growth from Intel’s Data Center, Internet of Things (IoT), and NAND businesses will be sufficient to offset weakness in its core PC business. In addition, a new Windows operating system has not resulted in increased PC demand in 20 years.
Lastly, the report expects PC and storage segments to stabilize this summer, while gross margins have already peaked at 65.4% in the December quarter (4QCY14) and should trough at 58% in 3QCY15.
I think you missed the point. The question was asked why the share price dropped yesterday and today. Without regard to your opinion on Danely, he is effective in hitting the stock price of INTC. The company is ineffective in countering his articles, whether propaganda or not.
INTC goes down much more than up and it lingers down. You always attempt to make it sound as if INTC is a normal stock. My skill set is fine. I trade the stock. You don't. All you do is attack other posters. It is like you have diaper rash.
No. I didn't see him change his price target, however, stating that INTEL will be forced to lower guidance again is a huge sell trigger.