Raymond James’s Hans Mosesmann today cut his rating on shares of Intel (INTC) to Market Perform from Outperform, after cutting his estimates because of recent flooding in Thailand, and arguing PC market weakness may make it hard to support the current multiple on the stock.
Mosesmann cut his estimate for this year to $2.44 per share in profit on the same $54.81 billion in revenue, but fore 2012, he goes to $56.6 billion in revenue and EPS of $2.50 from a prior estimate of $57.3 billion and EPS of $2.70.
Mosesmann argues the assumptions about the Thai floods, which have hobbled production of numerous components and raised concerns over the outlook for many tech stars, including Microsoft (MSFT), may be too optimistic.
“While IDC estimates that the PC unit shipments will only be hurt by a mere 70 bp in 2012, this analysis assumes that the shortage is resolved by 2Q12 and that demand trends return to normal (or better) when sufficient supply is returned,” writes Mosesmann. But Intel has greater-than-normal exposure to so-called white box vendors, smaller makers of PCs without much clout. If they don’t have the pull needed to get scarce parts to make computers, they won’t be able to ship units with Intel’s processors.
Mosesmann still sees many reasons to like Intel as an investment, including the 3.6% dividend yield, and the impending shipment of new processors such as “Ivy Bridge” and “Romley.” But with a continued lack of traction in mobile devices, “our view that the shares should trade in the mid-to-low teens in terms of an out- year P/E multiple now appears a stretch.”
Intel shares today are down 32 cents, or 1.4%, at $23.25.
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