Analyst Cautions on Intel and PC Growth For Rest of 2012

All you had to do was review the recent earnings reports from Dell Inc. (NASDAQ: DELL) and Hewlett-Packard Co. (NYSE: HPQ) and you knew that a PC slowdown was still underway.  Unfortunately, the trend remains here.  It was about three years ago that we declared being a PC manufacturer almost no different from being a basic toaster maker.  It is an appliance.

Today comes a report from Stern Agee’s analyst Vijay Rakesh, where the call is against Intel Corporation (NASDAQ: INTC).  Rakesh is not just talking about the current quarter.  He is lowering expectations for the fourth quarter as well based upon weak consumer demand, cautious PC OEM October quarter commentary with lowering PC channel inventory.

The Intel estimates are being cut as follows (billion in revenue, and per share on earnings): third quarter revenues and EPS from a prior $14.1B/$0.57 to $13.9B/$0.56 EPS versus a prior consensus of $14.27B/$0.60 EPS; fourth quarter from prior $14.8B/$0.63 to $14.5B/$0.61 EPS and that is against a consensus of $15.2B/$0.72 EPS. Rakesh also cut the 2012 PC sales growth targets to flat from 4% for 2012 to 2.3% from 4.2% in 2013.

In short, Rakesh is far lower than Wall Street’s consensus targets for Intel. The analyst also took the target down to $24 from $25 for Intel shares.  That is down under today’s share price of $24.85.  Apple Inc. (NASDAQ: AAPL) is part of the blame here as you would expect for its new products being rolled out, but the news is also not really a good omen for Microsoft Corporation (NASDAQ: MSFT) ahead of its new Windows release.

We would note that the consensus price target from analysts on Intel is currently $28.81.  Still, it was hard to not notice that the research report does address the share buybacks and this high 3.6% dividend.  He noted that it will be tougher to maintain high levels of share repurchases while maintaining its cap-ex plans and while maintaining its dividend growth train.

JON C. OGG