Jefferies Cuts Intel Estimates

In a report published Friday, Jefferies analyst Mark Lipacis maintained a Buy rating on

, while reducing the price target from $48 to $45, citing weaker PCs.

noted weaker-than-expected PC trends, during its May quarter earnings call. It also indicated to "below normal channel inventories," while saying that it expects the PC market to seasonally improve in the second half of the year. This improved is likely to be backed by demand driven by the release of Windows 10 and Intel's new SkyLake MPU platform. "We think that the inventory purge in front of Win10 and Skylake is larger than we expected, and therefore we lower our Street high estimates," analyst Mark Lipacis said. The diluted EPS estimates for FY15 and FY16 have been reduced from $2.37 to $2.25 and from $3.00 to $2.82, respectively. Referring to Intel's several cyclical tailwinds, Lipacis commented, "In 2H15, we expect Intel and the rest of the PC supply chain to benefit from both better seasonal shipments, and an inventory restock. Furthermore, by mid-16, we expect Intel gross margins to expand as 10nm start-up costs roll out of its COGs." Jefferies believes that Intel also has secular tailwinds and expects the "operating profits from its $14 billion data center business, (50% Op Margins, growing 15% annually)" to exceed "those from its client businesses (PC, tablet and handset)" between 2016 and 2017.