Auriga USA has cut the profit estimates and price target of chip maker Intel
"We now see notebook unit shipments potentially turning negative in Q3, with some rebound in Q4, but at a pace that is still well below normal seasonality. Motherboards seem to be relatively stable near-term, but Q4 is likely to turn negative as well," analyst Daniel Berenbaum said in a note to clients.
The brokerage now expects third-quarter notebook unit shipments to be flattish or even down low single digits quarter-over-quarter, with the fourth-quarter notebook units potentially being up high single-digits off the lower base.
Analyst Chris Caso of Susquehanna Financial also said the near-term issue for second half 2010 is the gap between demand and prior expectations, and the inventory built as a result.
"Our checks still point to flat to very slight Q/Q notebook production growth in Q4 as this excess inventory is adjusted. For Intel in particular, we think this correction will necessitate a production adjustment that would negatively affect Q4 gross margins," Caso, who has a "neutral" rating on the stock, said in a recent note.
Berenbaum, who cut his price target on Intel stock to $22 from $25, said near-term risk to consensus estimates could still drive stock price downside.
The analyst also reduced his third-quarter forecast to pro-forma earnings of 51 cents per share on revenue of $11 billion from 54 cents per share on revenue of $11.5 billion. Wall Street expects Intel to earn 50 cents a share on revenue of $11.08 billion.
Berenbaum also cut his 2010 estimates to pro-forma earnings of $1.95 a share on revenue of $43.4 billion from $2.04 a share on revenue of $44.4 billion. Wall Street expects the chip giant to earn $1.96 a share on revenue of $43.61 billion.
However, Berenbaum has a "buy" rating on Intel and said "semiconductor stocks tend to trade as a group, and our negative overall bias on cyclical semis makes this buy rating stand out."
"Quite simply, our work suggests that, despite broad uncertainty in consumer and enterprise spending, Intel has a strong product cycle in the best secular growth segment -- to wit, its Nehalem server processor offering for data center," Berenbaum added.
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