Citigroup chip analyst Glen Yeung this evening reiterates a Neutral rating on shares of Intel (INTC) while cutting his price target from $25 to $23, after reducing his estimates for this quarter and next to account for weaker-than-expected PC demand.
Yeung, like Gus Richard of Piper Jaffray yesterday, and like the folks at IDC on Monday, warns that trends last month around the event of the Chinese New Year have not been encouraging for PCs:
YTD, US retail POS demand (based on NPD data) is down 1% (after adjusting for an extra week in January), inline with our annual forecast for Intel�s CPU business. However, our checks suggest Chinese New Year sell through was poor, pointing to weakness in other geographies; this has resulted in lower component demand from Lenovo for March. Recent IDC data supports this, and suggests changes in the Chinese government incrementally impacted sales to the downside. As noted by Citi�s Joe Yoo, easy comparisons likely limit meaningful worsening of y/y trends. Nonetheless, we characterize the demand environment as weak.
Mind you, some of the drop off may also have to do with Intel’s rolling out later this year new microprocessors based on its “Haswell” architecture, notes Yeung:
Our checks with the PC supply chain suggest Intel will launch the desktop version of its new Haswell architecture in April, notebook in June. Because Haswell is not socket compatible with Ivy Bridge (the prior generation), this has the effect of reducing demand for Ivy Bridge ahead of the Haswell launch.
Yeung’s Q1 estimate goes to $12.25 billion, 57% gross margin, and 37 cents EPS, down from $12.6 billion, 57.9%, and 42 cents. His Q2 view goes to $12.4 billion, 57.3%, and 37 cents, down from $12.54 billion, 57.8%, and 38 cents.
Those estimates are below the consensus of $12.7 billion and 41 cents this quarter, and $12.92 billion and 41 cents next quarter.
Intel shares today closed up 4 cents at $21.18.