INTC--Heavy trading in Intel ahead of results
By Susan Lerner, CBS.MarketWatch.com
Last Update: 4:07 PM ET Oct 17, 2000 NewsWatch
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NEW YORK (CBS.MW) -Intel shares teetered ahead of the company's third quarter earnings report expected after the close, finally ending the day in positive territory.
The chipmaker's shares moved in and out of the red before closing up 50 cents at $36.18 on heavier than normal volume Tuesday as investors await the imminent release of the company's latest numbers.
Tuesday's fall follows a $4.69, or about 12 percent, on Monday as the latest in a series of negative comments from the sell-side took their toll on the stock (INTC: news, msgs).
Intel warned on Sept. 21 that it would miss revenue expectations for the quarter and analysts are now looking for sales to grow between 3-5 percent from the second quarter to an average $8.6 billion, according to First Call.
On the earnings front, the analysts are now expecting Intel to post profits of 38 cents a share on average, that's down from 41 cents pre-Sept. 21. Intel's report is expected after the bell on Tuesday.
Intel shares have lost just about half their value since warning that slack European demand would impact sales growth. The company also said it expects expenses to rise 7 to 9 percent from $2.2 billion in the second quarter.
Revenue concerns
Salomon Smith Barney analyst Jon Joseph, who had warned of problems in the chip sector during the summer, on Monday lowered his third- and fourth-quarter earnings-per-share estimates to 37 cents each, from 38 cents and 40 cents, respectively, and also dropped his 2001 estimate to $1.55 per share from $1.75.
Given the weakness in the personal computer motherboard, chipset and memory markets, Joseph said he now believes there is a chance Intel's number will be "slightly below" recent third-quarter guidance for sequential revenue growth.
"More importantly," Joseph said, "the company continues to rapidly expand capacity at a time when demand is coming much weaker than anticipated, which we believe will have a leveraged and negative impact on margins in Q4 and in 2001."
Joseph also slashed his price target for the stock to $50 from $75, but left his "outperform" rating on the shares unchanged because the stock has been "virtually cut in half" over the last six weeks.
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CS First Boston analyst Charlie Glavin was also cautious going into the company's third-quarter earnings report.
"We are becoming more cautious about how Intel is going to address several lingering issues," Glavin told clients. "While we are still bullish about end-market prospects, especially for servers and laptops, we are getting more concerned about the return on Intel's R&D (research & development) and its visibility."
Part of Glavin's concern, he said, is that he believes Advanced Micro Devices (AMD: news, msgs) has already engaged in a price war before Intel is even ready for the 1-GHz market and while Intel is still trying to handle its excess processor inventory.
Prior to Monday's drop, the stock had traded higher for two days following a sharp sell-off after a slew of negative comments from the Street and the warning |
