FBR Research Maintains a 'Market Perform' on Intel (INTC); Q4 Channel Checks Indicate Decline Qtr-over-Qtr

November 19, 2009 7:29 AM EST

FBR Research maintains a Market Perform rating on Intel (Nasdaq: INTC), price target $27.

FBR analyst says, "Recent checks into 4Q PC builds with the top five notebook ODMs and top four desktop motherboard makers are worse than our month-ago checks. Overall, we forecast 4Q PC builds to decline -1.5% QOQ, worse than our month-ago forecast of +5% growth QOQ. Our contacts now expect notebook builds to grow +9% QOQ (versus month-ago checks of +11.5%). Desktop builds are forecast to decline -16.5% QOQ (versus month-ago checks of -4.5% QOQ). The negative revision to 4Q motherboard builds is due to lower-than-expected October shipments, some component shortages, and a possible 3Q build-ahead (as we discussed on10/05/09). The slight negative revision to 4Q notebook builds is due to lower-than-expected demand for consumer ultra-low-voltage (CULV) models. We hear component tightness (but not shortages) still exists for hard disk drives, optical disk drives, DDR2/DDR3 memory chips, and pickup heads."

"We are leaving our Intel 4Q financial estimates unchanged for now, but we note a negative bias to our estimates and will wait until we conduct our next round of checks one month from now before potentially cutting estimates. Stepping back, we respect Intel's stellar execution and strong product road map, and given its vastly improved earnings power we could look to get more constructive on shares near $18. While the stock does seem inexpensive right now, we maintain our Market Perform rating until we get better visibilityinto 4Q PC sell-through trends. We maintain our 2010 GAAP EPS estimate of $1.65 and our $27 price target, based on a constant 15x multiple ofour 2010 GAAP EPS estimate. Given the heightened risk that 4Q PC chipshipments may be less than seasonal, investors should focus onenterprise and communications-exposed chip firms for 2010. Preferred value stocks include Fairchild (NYSE: FCS), Microsemi (Nasdaq: MSCC), and TI (NYSE: TXN). Preferred growth stocksinclude Marvell (Nasdaq: MRVL) and Silicon Labs (Nasdaq: SLAB)."

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