Analysts maintain ratings on Intel, shares rise

Intel (Nasdaq: INTC) rose Friday after becoming the latest company to get hit by inventory screw-ups and slumping demand.

Most analysts, not surprised by the news, reiterated their ratings on the stock and said they expect a pick-up in PC demand by the second half of 2001. Some saw Intel's refusal to comment on next year as a sign that the worst is yet to come.

Shares were up 1.5 to 33.81, or 5 percent. The chip-maker warnedThursday that demand has been slower-than-expected across the board, with the exception of servers, and consumer sales into Japan and China.

Intel blamed a faster than anticipated slowdown in the world wide economy as the reason for the miss, and noted that U.S. and Europe are especially weak. Its fourth quarter revenue is now expected to come in sequentially flat, versus its previous expectation of 4 percent to 8 percent sequential growth. That's a $500 million to $600 million shortfall relative to earlier guidance.

USBancorp Piper analyst Ashok Kumar reiterated a "buy, aggressive" rating on the stock, and had a price target of $55, but reduced revenue and earnings estimate for 2001 from $38 billion and $1.72 a share to $37 billion and $1.55 a share, respectively.

"The straw that we were grasping for to save Intel's quarter did not materialize," Kumar stated in a research note.

"High-end flash and servers remain only islands of product strength," Kumar said. He added that business in Japan and China could be deteriorating as well.

On a positive note, Kumar said he expects a pickup in demand by the second half of 2001, "as PCs continue to remain the centerpiece of the e-business infrastructure buildout."

"We believe that the stock to a great degree has discounted a revenue shortfall. However, it could be two quarters before we work through the oversupply and the demand environment stops deteriorating," Kumar added.

Prudential Securities analyst Hans Mosesmann held his "accumulate" rating on the stock, and lowered estimates for the second time this week.

Mosemann said that he saw the downward revision coming when he lowered estimates earlier in the week, but found it "unusual" that Intel is seeing weak fourth quarter sales for motherboards and notebooks in Asia.

Gerard Klauer Mattison & Co. analyst John M. Geraghty reiterated a "buy" rating and put a new $50 price target on the stock.

Graghty said he believes the company's overall position continues to be strong, and that the semiconductor industry slowdown is only temporary.

"We expect that in mid-2001, business conditions will improve and the inventory situation will be resolved."

Geraghty said he expects "a flat 1Q01 versus 4Q00, an annual revenue gain of 13 percent.

"We believe Intel's move to lower 4Q revenue guidance may be the final shoe to drop in the ongoing inventory correction in the semiconductor industry. If the stock trades off on this news, we would be aggressive buyers."

SG Cowen analyst Drew Peck maintained a "neutral" rating on the stock.

Peck called the details of Intel's comments "puzzling."

"Management said that ASPs were stable, directly contradicting the recent SIA data that suggest a sharp decline during the past several months," Peck stated.

He also said management's statement that inventories were not unusually high was unusual; "we would observe that, if revenues are falling well short of expectations, and prices are stable, then unit demand has to be the culprit."

"The numbers don't add up, and that worries us," Peck stated.

He added that its "Safe to assume... things will deteriorate in Q1," and that anyone that assumes things will improve from here is over-optimistic, considering capacity is still increasing while demand wanes in the PC industry.
Intel confession: 4Q sales will miss estimates