Prepare for an Intel Corporation (INTC) Miss

Word on the Street
The data has now caused two Street analysts to recently trim estimates on Intel Corporation (NASDAQ:INTC) in the first quarter.

Piper Jaffray analyst Gus Richard, who rates Intel as “neutral” alongside a $21 price target, is dropping his first-quarter revenue estimate to $12.4 billion, down from $12.8 billion. That’s well below Intel’s own guidance, which calls for $12.7 billion in sales, with $500 million of wiggle room. Servers are expected to be strong, but slow PC sales will outweigh any server upside.

One small silver lining is that as the product mix shifts towards servers, gross margins will benefit. The data center group generating an operating margin of 47% last year, easily topping the PC segment’s 38%. Richard thinks that it’s a little “too early” to predict a PC rebound later this year, since he believes Ultrabook prices are still too high relative to their functionality.

Citigroup analyst Glen Yeung feels similarly about Intel Corporation (NASDAQ:INTC). The analyst also has Intel at “neutral,” but recently reduced his price target from $25 to $23. Yeung points to poor sell-through in the Chinese market following the New Year. He’s expecting first quarter sales to come in at $12.25 billion, even worse than Piper Jaffray is modeling for.

Intel is approaching the release of its newest Haswell chips, which should see desktop versions launch in April followed by notebook models in June. Leading up to the new chips, demand for the previous-generation Ivy Bridge family is expected to decline since Haswell isn’t socket compatible.

Prepare yourself
Keep in mind that consensus estimates are still calling for $12.7 billion in sales, so both analysts are expecting Intel to miss this quarter. Intel Corporation (NASDAQ:INTC)’s soft revenue outlook combined with increased capital spending dropped shares last quarter. Intel investors better brace themselves for some first-quarter gloom.

The article Prepare for an Intel Miss originally appeared on

Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends Apple and Intel. The Motley Fool owns shares of Apple, Intel, and Microsoft.

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