Intel May Miss Q4 Sales Consensus and Guidance

Analysts at FBR Capital Markets maintain their “market perform” rating on Intel Corp (NASDAQ: INTC). The target price for INTC is set to $27.

According to FBR Capital Markets, recent checks have indicated that PC builds with the top five notebook ODMs and top four desktop motherboard makers have worsened from the previous month. FBR Capital Markets expects PC builds to decline by 1.5% q/q during the current quarter, as compared to the previous expectation of 5% growth, due to lower-than-expected October shipments, shortages in some components and a possible build-up in Q3. FBR Capital Markets has also reduced its expectations on 4Q notebook builds due to weaker-than-expected demand for consumer ultra-low-voltage (CULV) models.

Although Intel is on track to meet the guidance, another negative revision in the build plan for Q4 may pose a risk for INTC’s guidance, FBR Capital Markets said.

Meanwhile, analysts at Bank of America Merrill Lynch have downgraded Intel Corp (NASDAQ: INTC) from “buy” to “neutral,” while reducing their estimates for the company. The target price for INTC has been reduced from 27 to $21.50.

With PC supply chain indicating a negative bias towards desktop builds, Bank of America Merrill Lynch expects INTC’s Q4 sales at $9.9 billion, reflecting a 5.5% q/q growth, which is lower than the consensus and guidance of 7.6% growth. Bank of America Merrill Lynch believes that INTC would not meet the near-term estimates unless the server sales and PC builds improve substantially in late Q4, which seems unlikely.

According to Bank of America Merrill Lynch, there is a risk of excessive inventory build in 1H10, as Intel may have anticipated continued robust growth and increased internal fab loadings. The EPS estimates for 2009, 2010 and 2011 have been reduced from $0.67 to $0.64, from $1.70 to $1.43 and from $1.85 to $1.56, respectively.