Shares of the Intel Corporation (INTC) closed down -1.36 or -5.39 percent to $23.87 per share on Friday, after the company announced it expects sales to be flat in 2014, versus analyst estimates of a +1.4 percent increase over 2013 sales. The lower forecast means this will be the third year in a row that Intel fails to meet analyst expectations.
The announcement of flat 2014 sales was made at Intel’s annual meeting with industry analysts on Thursday afternoon. Intel stock started out higher during the company’s analyst day, rising +2.7% initially to a six month high, until the company announced its guidance for 2014, which stunned participants and sent the stock sharply lower.
Santa Clara, California based Intel Corporation is the world’s largest maker of semiconductor chips by revenue. Founded in 1968, the company owns a slew of important patents for microprocessors and processors used in most personal computers. Intel invented the world’s first commercial microprocessor in 1971.
The company’s annual meeting with analysts began well, with the Intel executives outlining the company’s plans to quadruple table CPU shipments in 2014, build up its foundry business and aggressively pursue the mobile market. Nevertheless, towards the end of the presentation, Intel revealed that 2014 sales would be flat, significantly lower than the +2.1 percent increase that analysts expected.
Analysts after the meeting were mixed in their opinions on Intel stock, Jeffries analyst Mark Lipacis raised his target price by $2 per share to $32 from $30. He stated that, “Intel’s message was compelling: its product line is geared to the new market reality, PCs are stabilizing, servers are growing, and it expects to grow its tablet MPU shipments by 4x to 40m units in 2014. Most importantly, it appears to be extending its manufacturing lead over TSMC, which we think translates to share gains in tablets and smartphones.”
On the other side of the coin was Goldman Sachs analyst James Covello, reiterating a sell on the stock, he believes that even a flat forecast for revenue growth is aggressive. He stated that, “We came into the meeting looking for reasons to get more bullish on the stock and had explicitly laid out several things we were hoping to hear during the meeting. Instead, we got nearly exactly the opposite with Intel guiding for another year of no revenue or EPS growth but still record capex levels”.
He concluded saying, “Unfortunately, 2014 looks like another year where the Street will need to be worried about estimate reductions throughout the year and we therefore believe the stock is likely to continue to underperform,” Goldman Sachs has a $16 target price for Intel stock.
Intel stock is currently at the high end of its yearly range. After the company’s weak revenue guidance and warning, many investors may reconsider staying long. Nevertheless, if Intel succeeds in expanding aggressively into the mobile market and selling chips to other manufacturers, the long term picture for the stock could be positive.
Other News About Intel
Intel: What You Need To Know
Seeking Alpha piece on the long term prospects for the company.
HP to Ship $89 Android Tablet with Intel Chip
Mesquite tablet to go on sale on Black Friday.
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