Bernstein Cautious On Intel, AMD Before Quarterly Prints

The big two PC chipmakers, namely Intel Corporation INTC and Advanced Micro Devices, Inc. AMD, are gearing up to release quarterly results in the coming days.

A Bernstein analyst expressed uneasiness over the companies' prospects, with projections for structural headwinds at Intel and  an uncertain outlook for AMD. 

AMD is scheduled to issue its Q1 report after the close Wednesday, April 25. Intel is set to roll out its quarterly financials =after the close Thursday, April 26.

The Analyst

Bernstein analyst Stacy Rasgon has an Underperform rating on Intel and $38 price target, 25 percent below where the stock trades today. 

For AMD, Bernstein has a Market Perform rating and $13 price target, suggesting roughly 30-percent upside. 

Intel Headed For In-Line Q1, But Structural Cracks Loom

Intel is likely to report Q1 results in-line with its guidance, but a penny below the consensus, which calls for revenue of $15.1 billion and earnings of 71 cents per share, Rasgon said in a Tuesday note. (See the analyst's track record here.) 

The analyst estimates below-consensus results for Q2, as investors seem to be expecting continued data center strength on top of "surprisingly strong" performance in Q4, Rasgon said. 

Further upside will be needed to support the shares, the analyst said. 

In 2019, Bernstein projects margin pressure due to a deteriorating mix shift. Higher capex, the apparent failure of 10nm technology, rising competition, record high working capital and increasingly incoherent spending commentary could hurt Intel, Rasgon said. 

Gross Margin Key For AMD

AMD is expected to report a roughly in-line Q1, with the consensus at $1.56 billion in revenue and 9 cents in earnings per share, Rasgon said. Bernstein is slightly ahead of the Street for Q2 and in-line for FY18.

Beyond the crypto noise, Rasgon said AMD's long-term story continues to depend on the success of new products. The Street is seeking an inflection point to indicate that new products are gaining traction, the analyst said. 

"To that end we continue to believe gross margin outlook will be a bigger driver of the shares than revenues," he said. 

AMD's future is "uncertain," but recent actions have de-risked the balance sheet and supply situation, Rasgon said. 

" ... Expectations have risen markedly, and the case for upside from a revitalized product road map, while tantalizing, is nerve-wracking." 

The Price Action

Intel shares have gained about 12 percent year-to-date period compared to a little more than 2-percent advance by AMD.

Intel shares closed Tuesday up 0.68 percent at $51.45, while AMD was up 0.5 percent at $10.09. 

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