Northland Capital Markets Analysts Slash Intel Estimates Due to Huawei Export Restrictions, AMD Competition, and PC Demand Slowdown in 2H:24
In a recent report, analysts at Northland Capital Markets have lowered their estimates for Intel (NASDAQ: INTC) due to various factors impacting the company's performance. These include export restrictions targeting Huawei, loss of server CPU market share to AMD (NASDAQ: AMD), and expectations of a slowdown in PC demand in the second half of 2024 (2H:24).
The analysts cited a weaker global consumer market and higher DRAM prices as contributing factors to their expectation of weaker demand in the latter half of 2024. Despite these challenges, the investment banking firm maintained an Outperform rating on Intel stock, believing that the chipmaker will remain a leading-edge logic foundry alternative to TSMC.
Northland's price target for INTC shares is currently set at $68, indicating a potential upside of nearly 100% from the last closing price. However, Intel has already announced that it expects revenue to fall below the midpoint of its Q2 guidance range of $12.5 billion to $13.5 billion due to the impact of the Department of Commerce's decision to revoke export licenses to Huawei for laptops.
The analysts estimate that Huawei, a $400 million per year customer, likely affected Q2 revenue by $50 million to $75 million. Consequently, they have adjusted their Q2 estimates to $0.10 EPS on $12.8 billion in revenue, down from their previous estimate of $0.10 EPS on $13 billion.
Looking ahead to 2024, Northland analysts have revised their estimates to $0.90 EPS on $54.9 billion in revenue, down from $1.05 EPS on $56.1 billion. They noted that Intel continues to lose server CPU market share to AMD, with DC/AI revenue now projected to be $7.4 billion, down from $8.5 billion in 2H:24. Additionally, PC demand is not expected to see a significant year-over-year increase, leading to a decline in client PC revenue for Intel.
The analysts have reduced their client PC revenue assumption for the second half of the year to $15.6 billion from $16 billion. They anticipate that this mix shift and lower revenue will negatively impact gross margins, with non-GAAP GM expected to decrease to 45.2% for fiscal 2024, down from 45.6%.
In conclusion, the revised estimates for Intel by Northland Capital Markets reflect the challenges faced by the company in the current market environment. Investors should closely monitor Intel's performance in the coming quarters to assess the impact of these factors on the company's financial health and stock price.