Risks To Intel's Estimates Are Increasing

Following better-than-seasonal notebook ODM shipments in Q2:16, July notebook shipments declined 21 percent month-on-month, below normal seasonality.

Citi’s Christopher Danely reiterated a Neutral rating on Intel Corporation (NASDAQ: INTC), with a price target of $35.

July Shipments

“We continue to believe the recent PC strength was due to re-stocking, and expect notebook shipments to be seasonal during 3Q16 before falling below seasonality in 4Q16,” Danely mentioned.

July shipments fell 21 percent month-on-month, as compared to the normal seasonality of a 16 percent month-on-month decline. However, this decline was in line with the estimate.

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Notebook units are expected to increase 5–8 percent quarter-on-quarter in 3Q16, in line with the normal seasonality of a 6 percent quarter-on-quarter rise.

“Last year, notebook shipments were above expectations in 3Q15 due to re-stocking, in line with expectations in 4Q15, and below expectations in 1Q16. This year, notebook shipments were above expectations in 2Q16, and we expect notebook shipments to be in line with expectations in 3Q16 before falling off in 4Q16,” Danely stated.

Risk To Consensus

The analyst believes the PC space drives Intel’s shares, given that half the company’s EPS is derived from the PC end market.

However, with a recovery in Intel’s server business already accounted for in the consensus forecasts and guidance, Danely believes the risk to the consensus expectations was increasing.

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