Intel price target lowered - Canaccord

8/7/2019 Intel price target lowered - Canaccord

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Daily Letter | 14 April 2011

CanaccordCanaccordCanaccordCanaccord GenuityGenuityGenuityGenuity is the global capital markets group of Canaccord Financial Inc. (CF : TSX | CF. : AIM)is the global capital markets group of Canaccord Financial Inc. (CF : TSX | CF. : AIM)is the global capital markets group of Canaccord Financial Inc. (CF : TSX | CF. : AIM)is the global capital markets group of Canaccord Financial Inc. (CF : TSX | CF. : AIM)

The recommendations and opinions expressed in this Investment Research accurately reflect the Investment Analysts personal,The recommendations and opinions expressed in this Investment Research accurately reflect the Investment Analysts personal,The recommendations and opinions expressed in this Investment Research accurately reflect the Investment Analysts personal,The recommendations and opinions expressed in this Investment Research accurately reflect the Investment Analysts personal,independindependindependindependent and objective views about any and all the Designated Investments and Relevant Issuers discussed herein. For importantent and objective views about any and all the Designated Investments and Relevant Issuers discussed herein. For importantent and objective views about any and all the Designated Investments and Relevant Issuers discussed herein. For importantent and objective views about any and all the Designated Investments and Relevant Issuers discussed herein. For importantiiiinnnnffffoooorrrrmmmmaaaattttiiiioooonnnn,,,, pppplllleeeeaaaasssseeee sssseeeeeeee tttthhhheeee IIIImmmmppppoooorrrrttttaaaannnntttt DDDDiiiisssscccclllloooossssuuuurrrreeeessss sssseeeeccccttttiiiioooonnnn iiiinnnn tttthhhheeee aaaappppppppeeeennnnddddiiiixxxx ooooffff tttthhhhiiiissss ddddooooccccuuuummmmeeeennnntttt oooorrrr vvvviiiissssiiiitttt CCCCaaaannnnaaaaccccccccoooorrrrdddd GGGGeeeennnnuuuuiiiittttyyyyssss OOOOnnnnlllliiiinnnneeee DDDDiiiisssscccclllloooossssuuuurrrreeeeDDDDaaaattttaaaabbbbaaaasssseeee....

Annual EPSAnnual EPSAnnual EPSAnnual EPS AnnualAnnualAnnualAnnual RevenueRevenueRevenueRevenue TargetTargetTargetTarget

Changes2011E $1.92 from $2.05

2012E $2.00 from $2.20

2011E $48.75B from $50.50B

2012E $51.30B from $53.78B

$19.00 from $22.00

Intel Corporation

INTC : NASDAQ : US$19.49HOLD

Target: US$19.00

Bobby BurlesonBobby BurlesonBobby BurlesonBobby Burleson 1.415.229.7163

[email protected]

Chelsea HeffChelsea HeffChelsea HeffChelsea Heffernanernanernanernan 1.415.229.7162

[email protected]

COMPANY STATISTICS:

52-week Range: US$17.60 - 24.37

Market Cap (M): US$106,961.12

EARNINGS SUMMARY:FYE DecFYE DecFYE DecFYE Dec 2010A2010A2010A2010A 2011E2011E2011E2011E 2012E2012E2012E2012E

P/Sales: 2.5 2.2 2.1

P/E: 9.9 10.2 9.7

Revenue:Revenue:Revenue:Revenue: Q1 10,299 11,600 12,250

Q2 10,765 11,750 12,300

Q3 11,102 12,400 13,000

Q4 11,457 13,000 13,750

Total 43,623 48,750 51,300

EPS:EPS:EPS:EPS: Q1 0.43 0.46 0.45

Q2 0.51 0.45 0.45

Q3 0.52 0.48 0.52

Q4 0.51 0.53 0.58

Total 1.97 1.92 2.00

SHARE PRICE PERFORMANCE:

COMPANY DESCRIPTION:Intel Corporation is the world's largest semiconductor

chip maker, in terms of revenue. The company developsadvanced integrated digital technology platforms andcomponents, primarily integrated circuits (ICs), targetedat the computing and communications industries.

All amounts in US$ unless otherwise noted.

Technology -- Hardware -- Semiconductor Devices and Related

Technologies

WEAK PC SUPPLY CHAIN; LOWERESTIMATES AND PRICE TARGET

Investment recommendation

Intel is likely to guide short of consensus, in our view, as Q2 PC

production appears to be tracking below previous expectations. While

weakness is attributable to supply disruptions, we believe demand

concerns for notebooks and the potential for server share shift in the

back half of the year could pressure the stock. We are lowering our

estimates on a more flattish Q2 view, and we lower our price target from

$22 to $19.

Investment highlights

Outlook for Q2 to be impacted by supply disruptions.Outlook for Q2 to be impacted by supply disruptions.Outlook for Q2 to be impacted by supply disruptions.Outlook for Q2 to be impacted by supply disruptions. Our checksshow notebook production dropping off after April, as shortages of

materials from Japan inhibit build rates. We believe expectations of

a 10-15% Q/Q build in Q2 are now being revised to a flat to 5%

increase. For 2011, PC unit growth is likely to be closer to 5% Y/Y

versus Intel's call for 12-15% growth.

Concerns extend beyond Japan disruption, and couldConcerns extend beyond Japan disruption, and couldConcerns extend beyond Japan disruption, and couldConcerns extend beyond Japan disruption, and couldpressurepressurepressurepressure Intel's shares.Intel's shares.Intel's shares.Intel's shares. On the demand front, notebooks may see

weak sell-through given success of iPad 2 and

aggressive campaigns by other tablet OEMs. Another concern isserver share. AMD may begin to regain some market share in

servers with the launch of Hercules. While we don't expect AMD

to recover substantial server market share, the company's

present 6% share appears unsustainably low.
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We are lowering our estimates and price target

Revenue: Q1/11E lowered from $11.7 billion to $11.6 billion; C2011E lowered from$50.5 billion to $48.75 billion; C2012E lowered from $53.775 billion to $51.3 billion.

EPS: Q1/11E lowered from $0.47 to $0.46; C2011E lowered from $2.05 to $1.92;C2012E lowered from $2.20 to $2.00.

We are lowering our price target to $19 from $22. INTCs price target of $19 is 10xour C2011 EPS estimate of $2.00, compared to a 13x multiple for our coverage

universe.

Figure 1: Estimate changes

New EPSNew EPSNew EPSNew EPS Old EPSOld EPSOld EPSOld EPS New RevsNew RevsNew RevsNew Revs(M)(M)(M)(M)

Old RevsOld RevsOld RevsOld Revs(M)(M)(M)(M)

Q1/11Q1/11Q1/11Q1/11 $0.46 $0.47 $11,600 $11,700

C2011C2011C2011C2011 $1.92 $2.05 $48,750 $50,500C2012C2012C2012C2012 $2.00 $2.20 $51,300 $53,775

Source: Canaccord Genuity and company reports

VALUATION

INTC is trading at 10x our C2012 estimate for EPS, versus a median multiple of 13x for our

coverage universe. On a market cap to revenues basis, INTC is trading at 2.1x our C2012

estimate, compared to a median market cap to revenue multiple of 1.6x for our coverage

universe.

INVESTMENT RISKSAs Intel derives approximately 90% of its revenues from the PC market, any material

slowdown in PC unit growth could impact the company's revenues and profitability. In

addition, declining production volumes at Intel's internal factories could negatively impact

gross margins, as could adverse pricing conditions driven by aggressive competitors in the

processor and chipset space.


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APPENDIX: IMPORTANT DISCLOSURES

Analyst Certification: Each authoring analyst of Canaccord Genuity whose name appears on the front page of this investmentresearch hereby certifies that (i) the recommendations and opinions expressed in this investment researchaccurately reflect the authoring analysts personal, independent and objective views about any and all of thedesignated investments or relevant issuers discussed herein that are within such authoring analysts coverageuniverse and (ii) no part of the authoring analysts compensation was, is, or will be, directly or indirectly,related to the specific recommendations or views expressed by the authoring analyst in the investmentresearch.

Site Visit: An analyst has visited the issuer's material operations in Santa Clara, California. No payment orreimbursement was received from the issuer for the related travel costs.

Price Chart:*

Distribution of Ratings:

Global Stock Ratings(as of 3 March 2011)

Coverage UniverseCoverage UniverseCoverage UniverseCoverage Universe IB ClientsIB ClientsIB ClientsIB Clients

RatingRatingRatingRating #### %%%% %%%%

Buy 447 58.7% 36.9%

Speculative Buy 62 8.1% 66.1%

Hold 237 31.1% 17.3%

Sell 15 2.0% 6.7%

761 100.0%

Canaccord Ratings

System:

BUY:BUY:BUY:BUY: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months.

HOLD:HOLD:HOLD:HOLD: The stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months.SELL:SELL:SELL:SELL: The stock is expected to generate negative risk-adjusted returns during the next 12 months.NOT RATED:NOT RATED:NOT RATED:NOT RATED: Canaccord Genuity does not provide research coverage of the relevant issuer.

Risk-adjusted return refers to the expected return in relation to the amount of risk associated with thedesignated investment or the relevant issuer.

Risk Qualifier: SPECULATIVE:SPECULATIVE:SPECULATIVE:SPECULATIVE: Stocks bear significantly higher risk that typically cannot be valued by normal fundamentalcriteria. Investments in the stock may result in material loss.


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Canaccord Research Disclosures as of 4 April 2011

CompanyCompanyCompanyCompany DisclosureDisclosureDisclosureDisclosureIntel CorporationIntel CorporationIntel CorporationIntel Corporation 5, 75, 75, 75, 7

1 The relevant issuer currently is, or in the past 12 months was, a client of Canaccord Genuity or its affiliated

companies. During this period, Canaccord Genuity or its affiliated companies provided the following servicesto the relevant issuer:

A. investment banking services.

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C. non-securities related services.

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Canaccord Genuity is the business name used by certain subsidiaries of Canaccord Financial Inc., includingCanaccord Genuity Inc., Canaccord Genuity Limited, and Canaccord Genuity Corp.

The authoring analysts who are responsible for the preparation of this investment research are employed byCanaccord Genuity Corp. a Canadian broker-dealer with principal offices located in Vancouver, Calgary,Toronto, Montreal, or Canaccord Genuity Inc., a US broker-dealer with principal offices located in Boston,New York, San Francisco and Houston or Canaccord Genuity Limited., a UK broker-dealer with principaloffices located in London and Edinburgh (UK).

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Intel price target lowered - Canaccord

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