Intel Shares Rise as Investors See Sales Rebounding
Santa Clara, California, Oct. 13 (Bloomberg) -- Shares of Intel Corp., which last month said third-quarter sales would miss its targets, rose as much as 8.8 percent as investors bet the No. 1 computer-chip maker will rebound next year.
The stock rose 3.31 to 40.44 in midday trading of 48 million shares. The shares have dropped 47 percent since trading at a record 75.81 on Aug. 28.
Sales didn't grow as much as expected because of weaker demand in Europe, the company said on Sept. 21. That sparked concern about a broader personal-computer industry slowdown and sent technology stocks tumbling. Yet, many investors said they're convinced that sales in Europe will rebound next year, and demand for processors that run PCs and networking gear remains intact.
``Demand now is not as strong as the industry expected it to be earlier in the year,'' said Brian Eisenbarth, a portfolio manager with Collins & Co., which owns 75,000 Intel shares. ``The growth rate is still there, it's just not going to be as high as originally anticipated.''
Even so, there's plenty to be nervous about in coming months. Questions persist about when sales growth will pick up again, whether Europe is the only region affected by lower consumer PC demand, and increasing competition from Advanced Micro Devices Inc.
Intel on Tuesday is forecast to report profit of 38 cents a share, the average analyst estimate in a First Call/Thomson Financial survey. The company earned a split-adjusted 28 cents a year earlier. Sales are forecast rise 18 percent to $8.64 billion from $7.33 billion, the average estimate according to IBES International Inc.
Lower Estimates
Analysts have trimmed an average of 6 cents off their profit forecasts for this year and lowered expectations for next year by 10 cents to $1.76 a share, according to First Call. They've chopped $834.4 million from 2000 sales targets and $900.4 million from 2001 figures, bringing estimates to $34.5 billion for this year and $40.5 billion next year, according to IBES.
``We need a little reassurance,'' said Larry Borgman, an analyst with Josephthal & Co. with a ``hold'' rating on the stock.
First Call's forecasts include investment gains and exclude amortization of goodwill. Profit in the year-ago period excludes acquisition-related costs.
Intel's fourth-quarter forecast will dictate the stock's moves after the report, investors said. Since Apple Computer Inc. and Dell Computer Corp. said revenue won't meet estimates, analysts have worried that computer sales during the crucial holiday season may not rebound enough.
``People will be wanting to hear, `Look for a seasonally strong fourth quarter.' If it doesn't happen, people will be very upset,'' Borgman said.
The Santa Clara, California-based chipmaker has some key new products coming, including the much-touted Itanium processor for server computers than run corporate networks and Web sites and the Pentium 4 for desktop machines.
Some investors, including Eisenbarth, said revenue in Europe will be hurt this year and bounce back in 2001. They see chips penetrating new markets, lifting Intel's sales in coming months.
Other shareholders are less certain. The high single-digit sales growth rate some expect for Intel's fourth quarter won't be enough to help the stock in a market that prefers communication- chip makers that don't have exposure to the PC market, they said.
``Even if (Intel) puts up strong numbers, people are going to be like, yawn,'' said John Spytek, an analyst with Banc One Investment Advisors. ``People in general are going to be bored with it and ignore the PC names.''
Oct/13/2000 12:19 ET
For more stories from Bloomberg News, click here.
(C) Copyright 2000 Bloomberg L.P. |
