Calls on Intel May Be Too High, Analyst Says, as Notebook Makers Cut Output - Barron's

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Personal-computer demand has been on fire, with sales in the March quarter reaching the highest level in 20 years, but a shift in conditions could spell trouble.

Stocks that have benefited from the surge, such as the PC makers HP (ticker: HPQ) and Dell Technologies (DELL) could be vulnerable, as could PC-focused chip manufacturers like Intel (INTC), Advanced Micro Devices (AMD), and Micron Technologies (MU).

Citi chip analyst Christopher Danely warned in a research note Monday that checks with suppliers revealed a wave of delays in orders for parts. Danely said his contacts are blaming shortages of other components, but said he is concerned that too much inventory has built up in the notebook market, and that demand may have been overestimated.

Danely repeated his Neutral rating on Intel shares, trimmed his target for the stock price to $60 from $65, reduced his forecasts for profits, and warned that “the rest of the sector is at risk as well.”

The stock was up 0.5%, to $55.93 amid a broad market rally on Monday morning.

“Over the past few quarters, the upside in notebook orders has portended upside to Intel,” he writes. “Given the recent downside in notebook orders, we expect downside at Intel as well.”

The analyst noted that his colleagues in Taiwan have cut their estimates of notebook shipments in the second quarter twice. They cut their original forecast for 10% sequential growth in unit shipments to 7%, and more recently to 2%. “While these negative data points in the PC food chain are being mostly blamed on component supply shortages, we believe there is excess inventory in the channel,” he wrote.

Danely now expects Intel will achieve $71.6 billion in 2021 revenue and $4.49 a share in profits, from a previous target of $72.4 billion in revenue and $4.61 a share. For 2022, he now sees $71.7 billion in revenue and profits of $4.66 a share, down from $72.5 billion and $4.74 a share.

Danley sees similar risks for AMD, Micron, Nivida (NVDA) “and the rest of the semiconductor sector.”

Write to Eric J. Savitz at eric.savitz@barrons.com

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June 22, 2021 at 01:20AM
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Calls on Intel May Be Too High, Analyst Says, as Notebook Makers Cut Output - Barron's

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