Intel bucks estimate cuts

2 min read

Intel shares rose 5 percent after a couple more analysts cut their ratings on the chip giant and warned investors not to expect a V-shaped recovery.

Shares were up $1.38 to $ 32.87 on high volume Wednesday, but still were below their 52-week high of $75.81.

Investors have become accustomed to the bearish outlook, which is nothing new. Just last month, Salomon Smith Barney made similar comments about Intel and its competitors. In fact, most semiconductor stocks have been getting thumbs down from analysts as the economy backslides. AMD (NYSE: AMD) was down 35 cents to $24.40 Wednesday.

The most recent rating cuts were given more heft by Lehman Brothers analyst Daniel Niles' interview with Intel Chairman Andy Grove last night.

Niles slashed ratings on the stock Tuesday, saying that "like in 1996 and again in January of this year, investors are once again overly optimistic about a V-shaped recovery."

Niles lowered his earnings number for the first quarter from 21 cents a share to 19 cents a share, and for fiscal 2001 from $1 to 90 cents a share. Current analyst consensus, according to First Call Corp., expects a profit of 21 cents a share for the quarter and $1.03 for the year.

Niles said that while the interview with Grove did not directly lead to his lowering estimates, it did "lend historical perspective to the current industry cycle and its potential length and depth."

The interview did cover three points investors seem to have forgotten, Niles said. First, this is a broad-based inventory and demand problem that will take some time to reverse Second, if the US does not have a sharp recovery, problems are likely to affect Europe and Asia. And third, all major end-markets are having issues including PC, wireless and networking.

Niles quotes Grove saying "I don't expect the end demand to snap back. I think it is going to be in a gradual fashion. We are in this for some period of time."

Wit SoundView analyst Scott Randall also chopped estimates for the stock.

His reductions to current quarter and fiscal 2001 and 2002 estimates include assumptions for lower revenues, lower gross margins and higher operating expenses.

"We believe the pricing environment in 2001 will continue to pressure INTC," Randall wrote in a Tuesday report. The analyst added that the company's guidance--which suggests a 500 basis-point reduction in gross margins from December into March followed by a period of relative stability--"may prove a bit too optimistic."