ThinkEquity’s Sujeeva De Silva and Avian Securities’s Arnab Chanda take differing tacks on Intel (INTC) this morning, the former trumpeting Intel’s prospective growth, the latter initiating coverage with a Neutral rating and a cautious stance.
De Silva, who maintains a Buy rating on Intel shares and a $30 price target, writes that recent meetings with management and investors suggests to him that the areas of strength, including data center, embedded technology, and emerging market PC sales can offset a slowdown in the mature PC markets.
And investors underestimate the company’s prospects in mobile chip sales for smartphones and such:
We believe that Intel’s efforts in mobile are being underestimated, and expect rapid product cadence over the next three years to improve the company’s position versus competitors relying on trailing edge foundries, and address concerns about tablet/smartphone cannibalization of the company’s PC franchise. We expect 1Q12 to be the bottom for Intel, with easing hard drive constraints and steady improvement driven by data center, emerging market PC growth and embedded.
De Silva estimates $56.2 billion in revenue this year and $2.45 per share in profit. That is below the average $56.76 billion Street consensus for revenue but in line with Street GAAP EPS estimates. But De Silva thinks that Intel can deliver double-digit growth further out.
Chanda, on the other hand, with a $29 price target, writes that the main issue is not what Intel is doing right, but what happens with arch-rival ARM Holdings (ARMH).
He thinks ARM will increase its presence in notebooks and servers, Intel’s principal areas of success:
We believe that the key to Intel’s future success is not whether Intel succeeds in mobile, but whether ARM succeeds in computing. Given the dramatic ASP differences between Intel’s core notebook CPUs (5x) vs handset/tablet application processors, Intel’s future revenue growth will be predicated much more on maintaining share in notebooks/servers. We expect that WoA will drive ARM into Windows8 tablets and low-power notebooks in late Q4:12, with the possibility of gaining server share in C13/14 since multiple players (Calxeda, NVDA, AMCC, CAVM) are developing 32/64-bit ARM based server CPUs.
In somewhat related news, The Wall Street Journal’s Benn Rooney this morning pens an overview of Intel’s efforts in the smartphone chip market, quoting CEO Paul Otellini about how the company’s first priority in recent years was beating back Advanced Micro Devices (AMD) in the server market, not developing mobile.
As Otellini explained to the Journal, the battle for mobile processors is “a marathon, not a sprint,” and Intel intends to be a contender by an approach that is “steady and sure.”
Intel shares today are down 13 cents, or half a point, at $26.94.