UPDATE: Macquarie Downgraded Intel and NVIDIA Based on Thundering Cloud Computing
Nag downgraded Intel to Neutral based on pressure in the core PC market negatively affecting estimates. The analyst noted the acceleration of PC shipment YoY growth rate over the past three consecutive quarters. Macquarie commented that these growth rates have “historically been positively correlated with INTC gross margins and relative stock outperformance.” Nag remarked that cloud computing will likely increase growth rates in processor shipment and elevated processor inventories will add risk to 2H.
Although Macquarie approves Intel's strategy of leveraging their manufacturing advantage, near-term pressure will result in lower estimates. Nag lowered CY13 revenue estimates from $53.28B to $52.23B and EPS estimates from $1.87 to $1.73. CY14 revenue estimates were also lowered from $56.90B to $52.91B and EPS estimates from $2.32 to $1.82. PT decreased from $25 to $22. Intel closed at $23.10 on Thursday and is currently trading at -0.56%.
Macquarie downgraded NVIDIA from Neutral to Underperform as “we believe the continued shift towards cloud computing will impact the company's core graphics business and mobile offerings.” The analyst noted that deteriorating fundamentals will lead to multiple compression. Nag estimated NVIDIA graphic shares will decline to 61% in 2014 (from 65% in CY13) and Tegra business should expect to see increased competition from low end and convertible PCs.
The analyst lowered FY14 revenue estimates from $4.11B to $4.08B and EPS estimates were lowered from $0.73 to $0.71. FY15 revenue estimates were also lowered from $4.60B to $4.34B and EPS estimates from $1.00 to $0.77. PT decreased from $15 to $14. NVIDIA closed at $15.39 yesterday and is currently trading at -0.68%.
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