Summit Research Previews Intel's Q3 Results

• Intel Corporation INTC shares have risen by almost 10 percent over the last six months, reaching a high of $32.52 on October 8.
• Srini Sundararajan of Summit Research has maintained a Hold rating on the company, with a price target of $30.
• Sundararajan expects the company’s C3Q results and C4Q guidance to beat the consensus expectations.

Analyst Srini Sundararajan explained that ODM sales in Taiwan increased more than 15 percent in August, from the July levels, with above seasonal September trends. “This was not likely to have entered INTC’s guidance, when it guided, during the previous quarterly conference call,” Sundararajan said.

Also, server DRAM prices remained weak during C3Q, which is likely to have driven sales of servers with better processors. Sundararajan also expects DCG and IoT to be higher than the guidance, given the absence of negative news.

According to the Summit Research report, “[G]iven that tablet sales as well as the Chinese economy has been at best lukewarm, it is also likely that less contra-revenue would have been spent. Hence we think Intel will beat consensus.”

However, Fx headwinds are likely to have offset some of the upward momentum outside the US during C3Q, driven by higher ASPs, while a 1.3 percent year on year increase was reported in the number of PC units sold in the US.

Given the lowered expectations from Intel, Sundarajan believes that “investors who expect the worst for Intel given: a) China b) Some server weakness indicated by server DRAM price downswing and c) Tepid PC market, will give Intel a pass even if it just meets its guidance.”