When Intel (ticker: INTC) announced the replacement of current CEO Bob Swan with
(VMW) CEO Pat Gelsinger last week, the company also said fourth-quarter sales would beat its own quarterly guidance of $17.4 billion—but Intel did not say by how much.
Susquehanna Financial Group analyst Christopher Rolland may have figured it out for investors. In a Wednesday client note, Rolland wrote that his team calculated that Intel would generate $600 million to $700 million more in sales for the quarter than expected.
Rolland arrived at that conclusion because of strong personal-computer sales carried through the fourth-quarter, bolstered by people working and educating from home amid the Covid-19 pandemic. The analyst said that data from Gartner and IDC, and his team’s own industry checks suggested there is “plenty of room for upside” for the company’s PC sales.
Through its own checks, Rolland’s team found that there was roughly a 13% increase in fourth-quarter notebook shipments. But, Intel continues to cede microprocessor share to rival
Advanced Micro Devices (AMD)
in both laptops and Chromebooks, and gained a slight amount of market share in desktop computers.
Intel’s data-center business will likely be less of a bright spot, but Rolland’s team expects the quarter to be a bit better than Wall Street’s expectations of $5.48 billion, or a 24% decline from the year-ago quarter.
What’s unclear, according to Rolland, is whether the company will issue annual guidance. Intel typically does so on its fourth-quarter call, and the consensus for full-year 2021 sales is $69.8 billion. But because Gelsinger will take over Feb. 15, it wasn’t clear whether the company planned to set its annual goal without the new CEO at the helm.
Rolland called $70 billion an appropriate 2021 revenue target, which would give the new CEO “a little wiggle room.” Similar to many other analysts, the analyst has a positive view of Gelsinger and Intel’s prospects under his leadership. Intel has struggled as of late with a spate of issues surrounding its manufacturing technology, which at one point was a big competitive advantage for the company.
Intel has promised an update on Thursday’s call, yet because of the executive change the outlook may not be laid out in detail. Rolland wrote that he would prefer the company to outsource the manufacturing of some of its core PC or server products. Rolland’s target price for the stock is $54, and he rates it at the equivalent of a Hold.
There appears to be at least one signal that Intel has decided to move toward more outsourcing.
(ASML), a Dutch maker of semiconductor manufacturing equipment used by Intel and
Taiwan Semiconductor Manufacturing
(TSM), reported early Wednesday that it sold a net of six high-end systems in the fourth quarter.
According to Bernstein analyst Mark Li, that “net” statement implies some cancellations. While there were no specifics on the call, Li concludes that Intel cancelled some orders, and that Taiwan Semi asked for more equipment, indicating that Intel will outsource more production to Taiwan Semi.
Intel stock gained 0.6% in the regular session Wednesday. The stock dropped 2.1% in the past year, as the
PHLX Semiconductor index
Write to Max A. Cherney at [email protected]