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Goldman Sachs Concerned About Intel's Lack Of Growth, PC Business

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Goldman Sachs Concerned About Intel's Lack Of Growth, PC Business
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Intel Corporation (NASDAQ: INTC) reported its Q3:16 results with a mild beat to expectations, while issuing its Q4:16 guidance below the consensus forecasts.

Goldman Sachs’ Toshiya Hari maintains a Neutral rating on the company, while lowering the price target from $39 to $36.

Disappointing Guidance

For Q3:16, Intel reported revenue of 15,779 million, 1 percent above the consensus and estimate, with GAAP EPS of $0.69, which was ahead of the consensus but in line with the estimate.

The company guided to a revenue decline of 0.5 percent quarter on quarter for Q4:16, with gross margin decline of 230 bps quarter on quarter to 61 percent.

On The Sidelines

Hari prefers to remain on the sidelines following the disappointing growth in the Data Center Group (DCG) and “lack of conviction on 2017 PC trends.”

The analyst expressed concern regarding the continued weakness in the enterprise segment, mentioning that while DCG accelerated to 10 percent year-on-year growth in Q3, Intel lowered its full-year guidance to high-single-digit growth, from the earlier low-double-digit growth, citing enterprise headwinds.

Related Link: Intel's Q4 Guidance Is Conservative

“Growth in comms and cloud service provider remained strong, but we believe continued sluggishness in enterprise could weigh on broader DCG relative to Street expectations,” Hari stated.

The analyst also expressed concern regarding uncertainty regarding PC end market demand, pointing to the company’s below seasonal guidance for Q4 and management commentary.

“We continue to look for sustained evidence of better underlying PC demand before turning more positive,” Hari added.

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Latest Ratings for INTC

DateFirmActionFromTo
Jun 2017Bank of AmericaDowngradesBuyNeutral
Jun 2017Raymond JamesReinstatesUnderperform
Mar 2017MacquarieInitiates Coverage OnOutperform

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