--> INTC (+5%) is extending its breakout (after the co raised guidance in June) to a 10 year high in the premarket
Intel: Color on Quarter
- Topeka Capital Markets raises their INTC tgt to $38 from $34 after INTC reported 2Q14 rev upside and guided better than consensus, reflecting continued enterprise PC recovery as well strong data center demand. Gross margin strength reflects lower startup costs and better than expected units. We believe further opportunity remains for INTC into 2H14 as the enterprise refresh cycle persists, data center benefits from new products, and smartphones/tablets begin to ramp. They are also encouraged by increased full-year revenue guidance and plans for aggressive share buybacks.
- RBC Capital Mkts raises their INTC tgt to $34 from $31. Strong quarter and outlook (Q3 & FY14) as our FY15 FCF/sh estimate increases 12% to $2.25. View mgt decision to focus on greater capital return structure as prudent, optimizing BS. Rev upside is being driven by core PCCG and DCG segments, however view shares as fully priced considering deleveraging post-Q3 on recognition of start-up charges and uncertainty around future spending controls.
- Stifel raises their INTC tgt to $36 from $31. Intel delivered June revenues and earnings slightly above its positive pre-announcement. Looking out to the Sept quarter, demand is expected to return to a seasonal up 4% q/q growth and gross margin is expected to soar to a near four-year high 66% as the co continues to wring out costs from its 22nm manufacturing process. The INTC bears may point to the ~$1bn quarterly operating loss in the Mobile and Communications Group but they agree with mgmt that Intel's viability in broadening its markets and outgrowing its peers may depend on having full-featured cellular modems integrated into its processors.
- Oppenheimer notes INTC reported solid 2Q sales/EPS of $13.8B/$0.55, in line with estimates and June 12's positively pre-announced results. The third quarter was guided up 4% Q/Q to $14.4B, ahead of consensus and in line with historical seasonality. WinXP/Enterprise refresh and DCG are driving strength while MCG drags. Gross margin of 64.5% was impressive, is expected up another 150bps in 3Q. Mgmt's effort to return cash to shareholders ($2.1B in share buybacks in 2Q, $4B expected in 3Q, and new $20B authorization) are also encouraging. PC momentum looks sustainable near-term; they remain on the sidelines as INTC's pay-to-play strategy in mobile will likely continue presenting a trade-off between top-line growth and bottom-line dollars for the foreseeable.
- Needham notes that Intel reported 2Q14 results slightly above revised guidance issued in June. PCCG and DCG revenues both exceeded estimates and GM benefited from lower 14nm start-up costs, higher unit volumes and lower unit costs. 3Q14 revenue and GM guidance was stronger than expected due to continued strength in PCCG and DCG. However, 2014 guidance implies flat revenue and a decline in GM in 4Q14. In 2H15, they expect higher start-up costs to impact GM. They remain cautious about PCCG strength in 2015 as they expect the Windows XP refresh cycle will draw to a close, and they believe GM is likely peaking in the near term.
- Cowen raising tgt from $27.50 to $33 on better guide and shift of basis C15. Record GM in the face of massive mobile losses spring-load P&L for what should be at least ~$0.15-0.20 EPS accretion in '15 even in a base case as mobile losses bottom & inflect. That said, semis have now moved past mid-cycle and they remain bearish on consumer PC, esp if AAPL pivots tablet/NB paradigm again in '15 w/a new pdct.
- FBR Capital raises their INTC tgt to $35 from $33; underneath the surface, the quarter raised some long-term question marks. Firstly, year-end guidance implies flat 4Q14 revenue growth and 62% GMs (down 400 bps QOQ). Secondly, mgmt essentially admitted to an additional quarter (or more) pushout for Broadwell (which we view as the main driver of 2Q14's 66% GMs). Despite mgmt claiming Broadwell's push would not affect Skylake's launch, mgmt guided the part for a "2015" launch. They view Intel's manufacturing lead as a key competitive advantage. If this were to erode, it may cause us to change their opinion (Samsung may have 14nm FinFET late next year). That said, the mobile segment's $1.1B loss (on just $50M in revenue) challenges comprehension, which ironically, they view as a positive. A restructuring of the segment could drive $0.65 in annual EPS upside, a move that could drive up to $9 in stock value, a positive.
- Intel upgraded to Buy from Neutral at UBS; tgt raised to $37.50 from $30
- Intel upgraded to Buy from Neutral at B. Riley & Co.; tgt raised to $40 from $33.50
- Jefferies raised tgt to $45