The Bull And Bear Case For Intel Following Strong Q4

Matthew Ramsay of Canaccord Genuity reaffirmed his Buy rating on Intel Corporation INTC after the chip giant reported fourth quarter results above consensus expectations, driven by strength in PC ASPs as well as strong sales in Memory and IoT.

For the first quarter, Intel sees $14.8 billion in sales, 63 percent gross margin and $0.65 in non-GAAP EPS. The company also set a conservative outlook for flat revenue in 2017, or low-single-digit growth excluding the impact of the McAfee sale.

That said, Ramsay would watch the upcoming analyst day to examine several aspects of the 2017 guidance including the much lower DCG growth outlook, the possibility of challenging second half revenue comparisons and the higher 2017 capital expense outlook.

Following are the bullish and bearish aspects of the print:

Bullish:

• “PC ASPs grew 11% in 2016, offsetting secular unit declines, and led to a PC business that far outperformed expectations.”
• “IoT and memory businesses both delivered quarters well above our estimates.”
• “Gross margin guidance for 2017 of 63% is solid considering the 10nm PC roadmap transition and impact of removing high-margin McAfee revenue.”

Bearish:

• “Datacenter growth of 8% Y/Y again disappointed and while we had anticipated a lower DCG growth outlook for 2017, high-single digits was below our ~10% expectation.”
• “2017 capex guidance of $12B was well above our $9.6B estimate.”

Shares of Intel rose 1.46 percent to $38.11. Ramsay has a price target of $43.