Ahead of the Tape: Intel's Stock Price Is Booting Up on PCs -- WSJ
October 18 2016 - 3:02AM
Dow Jones News
By Dan Gallagher
When Intel Corp. benefits from a good personal-computer
business, it is important to remember that it is all relative.
About 68 million PCs were sold globally during the third
quarter, according to IDC. Sales are down 3.9% year over year, but
also happened to be about 3 percentage points better than what the
firm had forecast.
The result for Intel is a decent third quarter, due to be
reported Tuesday afternoon. The chip maker already raised its
revenue forecast for the period, crediting most of the move to PC
inventories getting restocked. Intel now expects revenue to come in
at $15.6 billion, plus or minus $500 million -- a gain of about 8%
year over year. Analysts expect per-share earnings of 72 cents, up
13% from the same period last year.
Those are solid growth numbers, especially relative to other
maturing tech giants. But the PC business that still drives more
than half of Intel's revenue continues to decline. The company has
deftly navigated this by focusing on segments such as premium,
ultrathin laptops that command better margins. Even so, Intel's
main hopes for future growth lie in the cloud and the chips that
drive it.
That makes Intel's data center business paramount. Analysts
expect this segment to deliver $4.6 billion in revenue for the
third quarter, up 11% year over year. But sales are unpredictable
as a few large-scale cloud companies like Amazon and Google drive a
growing portion of the spending on Intel's chips. As such, Intel's
data center revenue has fallen short of analysts' forecasts for the
last seven consecutive quarters, according to FactSet.
That presents some risk for the shares heading into Tuesday's
report. Intel is now up 19% over the past six months -- nearly four
times the return of the Nasdaq Composite. It is worth noting that
some of those gains can be credited to the company finally winning
some business in the iPhone from rival Qualcomm.
Over the longer term, though, Intel has deftly diversified its
business. That resilience, along with a healthy dividend and
reasonable valuation of 13.4 times forward earnings, still computes
for investors.
Write to Dan Gallagher at dan.gallagher@wsj.com
(END) Dow Jones Newswires
October 18, 2016 02:47 ET (06:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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