Could Intel's Earnings Be A Top This Quarter?

• Shares of Intel Corporation INTC have appreciated 10.42 percent over the past six months to $35.44 on December 29.
• FBR’s Christopher Rolland has maintained an Outperform rating on the company, with a price target of $38.
• Although the company has issued lackluster guidance for the quarter, Rolland expects Intel to “fare better than most” during 1Q16.

Analyst Christopher Rolland mentioned that although Intel reported slightly better than anticipated results for 4Q15, the 1Q16 and full year guidance were worse than expected.

Justification

Rolland attributed the disappointing guidance to weaker than expected run-rate revenue for Altera Corporation ALTR, which is expected to make a revenue contribution of only $1.6 billion.

Related Link: Intel Q4 Earnings Preview

The guidance was also due to “a more conservative view on the macro environment.” “That said, we did like the lowered capex estimate by $500 million to $9.5 billion for the year,” Rolland stated.

Rolland also expressed disappointment with the 4Q15 revenue for the DCG segment, which grew only 4 percent quarter on quarter driven by weaker than anticipated enterprise demand and the cloud being seasonally impacted.

“Overall, our general thesis is unchanged: DCG is the new driver of profitability for Intel as the segment has reached critical mass and should continue to grow at double-digit annual rates over the next few years,” Rolland added.

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