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Intel Remains A Show-Me Story Following Q3 Results

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Although Intel Corporation’s (NASDAQ: INTC) data center sales to cloud customers recorded healthy growth in Q3, the company’s data center sales to enterprises declined. The weak enterprise performance makes Intel “a show me story,” UBS’ Stephen Chin said in a report. He maintained a Buy rating on the company, while reducing the price target from $43 to $40.

Intel’s shares could come under pressure in the near term, since the guidance released for Q4 was lower than normal seasonality in both PC and data center sales, analyst Chin mentioned. He added that the Buy rating reflected the optimism of the company being able to reaccelerate its annual data chip sales to 10 percent y/y growth in Q4. These sales currently contribute 30 percent of Intel’s total sales.

Poor Enterprise Performance

Intel reported 32 percent y/y growth in data center sales to cloud customers for Q3, while recording a 3 percent decline in data center sales to enterprises. This decline came despite Intel indicating signs of stabilization in the previous quarter.

Chin estimated that data center sales to cloud customers had contributed 40 percent of Intel’s total sales, which was around the same size as sales to enterprise customers.

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Latest Ratings for INTC

DateFirmActionFromTo
Feb 2017Canaccord GenuityDowngradesBuyHold
Jan 2017Morgan StanleyUpgradesUnderweightEqual-Weight
Dec 2016Loop CapitalInitiates Coverage OnBuy

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