Intel Analyst Day on Tap: Best Products in a Decade, Says B Riley; Capex to Decline?
By Tiernan Ray
Intel (INTC) will host its annual analyst day meeting this Thursday, November 21st, in Silicon Valley, and a couple of observers weighed in with thoughts about the first such meeting for CEO Brian Krzanich, who took the helm in May of this year, along with president Renee James following the eight-year tenure of Paul Otellini.
B. Riley & Co.’s Craig Ellis reiterates a Buy rating on the shares, and a $28.50 pricer target, writing “We expect realistic acknowledgement of known, visible headwinds to past growth such as tablet PC cannibalization but expect strong counterpoints to include un-encroached multi-year technology and manufacturing leadership, strong embedded, mobile, PC, and server product cycles, and recent time to mkt and custom product-enhancing org/process changes.”
Krzanich will highlight the company’s multi-year semiconductor manufacturing process lead, and the advantages across servers, tablets, networking and other areas, he thinks:
We expect CEO Krzanich to express confidence Moore’s Law will be sustained with transitions to in-progress 14nm, in-development 10nm in 2015, and 7nm in 2017. The cadence – un-impacted by a now-resolved 14nm Broadwell defect intensity issue, would hold a multi-yr lead to industry, as shown by 22nm finFET’s timing.
With products such as the “Xeon E5” family of server chips, the “Haswell” line of PC processors, and the “Bay Trail” processor this year, “INTC can fairly state its portfolio is in the best position in 10+ years,” writes Ellis.
Ellis expects fairly consistent “messaging” as far as financials — mid-teens growth of data center products, a bottoming in the PC market, double-digit growth in embedded chip applications, and a 40% target for the free cash flow paid out as a dividends. Intel may back off of the average $10.8 billion in capital spend the last three years and target something more like $7 billion to $8 billion, which will leave more money for dividends.
In a less sanguine vein, Cowen & Co.’s Timothy Arcuri reiterates a Market Perform rating, arguing demand for “hybrid” PC devices that Intel has championed is uncertain; he also sees lower capex ahead:
The company is well positioned on new PC form factors such as 2-in-1s, but demand for these products remains, to us, very questionable. Competitive ARM solutions have forced Intel to match pricing but the company believes customers are choosing Intel for its technology roadmap as it continues to ramp 22nm, migrate to 14nm and work on integrated LTE solutions. Relative to concerns on growth as ASP mixes lower with Bay Trail, INTC continues to highlight that Bay Trail socket cannibalization should not be looked at relative to a >$100 Core part, but rather relative to a low-end ARM part or what is already a lower ASP Celeron/Pentium part that has not had the right cost structure for that price point. We would expect the company to press this point at the Analyst Mtg this week. On capex, it continues to push more re-use in an effort to combat rapidly rising capital intensity. While headline capex in ’14 could come down to the $9B level from ~$10.8B in ’13, we think this is predominantly related to 450mm (pushed out 18-24mos) and “core” capex will likely fall from ~$9B in ’13 to ~ $8-8.5B in ’14.
Intel shares today are up 14 cents, or 0.6%, at $24.66.
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