Intel Earnings Preview: Q408

Intel is scheduled to report fourth quarter 2008 results after the market closes on Thursday, January 15. Based on our analysis, we at are expecting INTC to report mixed results that fail to meet Wall Street’s recently reduced expectations.


Analyst Expectations

We are forecasting revenues of $8.2 billion and EPS of $.05. This would represent a 23% decline in revenues from last year’s $10.7 billion in the same period. The current analyst consensus calls for revenues of $8.3 billion and $.10 EPS. On January 7, the company pre-announced revenue of $8.2 billion (vs. prior guidance of $8.7 – 9.3 billion).


It’s obvious that the macro economic environment continues to deteriorate. Intel cited further weakness in end demand and inventory reduction within the PC supply chain as the reasons for further reducing revenue estimates.


With demand declining sharply, we believe Intel’s likely to experience excess inventory build up. This glut of inventory along with declining customer demand will put downward pressure on margins through the remainder of 2009.


Despite the gloomy economic outlook, we still expect Intel to remain profitable in 2009. The declining prices on personal computers (PC’s) will help stimulate demand from both businesses and consumers even in a bad economy.


Share Performance

Intel’s shares are down 42% from their 52-week of $25.29 in May 2008. In 2008, their shares dropped 44% marking it as one of the poorer performers of the Dow Jones index. However, since hitting a new 52-week low in November, the stock has rallied 19%.



Shares are now trading at 20x consensus 2009 EPS estimates. 2009 consensus estimates will likely come down following the earnings release and we see no real catalysts for the share price to go up in the near term. In fact, we would expect the company to re-test their 52-week low of $12 in the coming months.


Recommendation: Sell with a $12 price target.


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