Intel (NASDAQ: INTC) released fourth quarter and fiscal-year earnings for 2014 on January 15th. The report precipitated mixed ratings as the company broke revenue records but posted a mediocre forecast for the first quarter of 2015.
The report posted record revenues for both Q4 and FY2014, though these figures were in-line with analyst estimates. FY2014 revenue was $55.9 billion, up from $52.7 billion year-over-year. Q4 revenue was $14.7 billion, up from $13.8 billion year-over-year. Intel posted earnings per share of $2.31 for the year and $0.74 for Q4, beating estimates of $0.66 and marking a 39% year-over-year increase.
Intel CEO Brian Krzanich noted, “The fourth quarter was a strong finish to a record year. We met or exceeded several important goals: reinvigorated the PC business, grew the Data Center business, established a footprint in tablets, and drove growth and innovation in new areas. There is more to do in 2015. We’ll improve our profitability in mobile, and keep Intel focused on the next wave of computing.”
Overall, many were pleased with Intel’s earnings but some analysts are concerned about details embedded within it. Although Krzanich noted that Intel has “reinvigorated the PC business,” the report posted revenue of $8.9 billion in the fourth quarter for PC Client Group; down 3.5% from the previous quarter, though up 3% from the same time last year. Some believe that this is a sign of the PC market finally stabilizing after years of dropping, but not everyone is so sure.
Additionally, analysts stressed the disappointing first quarter forecast included in the report. Intel predicted $13.7 billion (+/- $500 million) for the first quarter. The analyst estimate for this figure is $13.8 billion, so Intel’s window allows for the possibility of missing estimates. Intel also estimated gross margin to be 60% (+/- a few percentage points), below the 65.4% reported in Q4. This weak forecast caused Intel shares to trade down 2% in after-hours trading after the report was released.
Intel CFO Stacy Smith said, “In 2015 we’re predicting kind of flat, nothing spectacular but stable, is how I would call it,” in an interview with Reuters.
On January 16th, analyst Kevin Cassidy of Stifel Nicolaus reiterated a Buy rating on Intel and raised his price target to $41 from $39. Cassidy noted, “Most times boring is good,” in regards to the report delivering results in-line with guidance. He continued, “Interesting to us was that Intel’s average selling price of its data center platforms increased 7% q/q and 10% y/y. We expect this trend to continue into 2015 as High Performance Computing, Cloud and mega-Data Center markets push for higher performance and, in our view, Intel has few competitors in these markets.” Cassidy also highlighted his confidence that the PC market has “clearly stabilized.”
Kevin Cassidy has a 76% overall success rate recommending stocks and a 33% average return per recommendation.
Separately on January 16th, analyst Cody Acree of Ascendiant Capital Markets reiterated a Sell rating on Intel with a price target of $24. Acree weighed in on the future of PCs, noting that the “PC market wrapped up a fairly healthy 2014,” though clarifying that this was “largely driven by the temporary enterprise upgrade cycle on Microsoft’s ending of Windows XP support.” He continued, “It looks as though the upgrade cycle [of PCs] is tapering off and we expect a return of a secular declining PC market in 2015.” Due to the decline of the PC, Intel “will be increasingly reliant on strong data center performance and growth of [Internet of Things].”
Cody Acree has a 52% overall success rate recommending stocks and a +11.9% average return per recommendation.
Also on January 16th, analyst Timothy Arcuri of Cowen & Co. reiterated a Market Perform rating on Intel and raised his price target from $36 to $38. Arcuri noted that worries surrounding the PC market have “lost much of its bite as [Intel] made CQ4 despite obviously burning a good bit of channel inventory.” He continued, “From here, it should grow more in-line w/PC mkt – not great, but removes a key fear among bears.” The analyst also noted, “The willingness of big volume chipmakers like [Qualcomm/Apple] to whip biz around at 14nm more than at prior nodes creates fertile ground for an improving foundry narrative as it rolls out 10nm in late ’15 (albeit we think still limited if [Intel] remains unwilling to release its design kits for fear of relegating its leading edge process lead).”
Timothy Arcuri has a 70% overall rate recommending stocks and a +15.2% average return per recommendation.
On average, the top analyst consensus for INTC on TipRanks is Moderate Buy.