Intel 1Q10 Preview

From Streetevents: Overview: Company is scheduled to report first quarter results on Tuesday after the close. The Street is widely expecting a strong quarter, with nearly every preview noting the potential for upside on the top and bottom lines. In the broadly positive round of previews seen over the past two weeks, estimates have been bumped several times as analysts consistently point to better than expected PC and server trends as well as a relatively benign pricing environment that should continue to support margins. Inventories will also be a focus as Q4 came in higher than expected and management pointed to another increase in Q1. Company's target is for an increase less than the $450M seen in Q4; any build approaching that level is unlikely to be well-received. Consensus metrics:

Reuters
EPS $0.38
Revenue $9.82B
StreetAccount (16 estimates)
Gross margin
Q1 61.4%
Q2 60.4%
2010 61.9%

Guidance: as is often the case, management's outlook will likely dominate interest on the call and dictate near-term trading for the stock. Expectations here are likewise high but are certainly a bit more varied. Most of the language was for top line growth close to the seasonal decline usually labeled at down 2-3%. However, there were several calls for flat and even a couple of mentions of modest growth. Current consensus of $9.68B implies a 1.4% decline from Q1. Note that most analysts believe the printed consensus will be an easy hurdle off a higher base. Gross margin outlook will also be a focus as the Street continues to debate whether Q4's 64.7% represented the peak. Several previews indicate that the company should be able to again approach this level in Q4. Any comment that throws doubt on this view could overshadow strong revenue guidance and weigh heavily on the shares.

Conference call at 17:30 ET

Stock sentiment: the shares have modestly outperformed the broader market and semi peers thus far in 2010, though much of the difference was seen in the first couple of weeks of the year. Stock is up 5% since the Q4 release, slightly below the Nasdaq and matching the SOXX. Views on the Street are solidly positive with buy-equivalent ratings outnumbering hold and sell-equivalents by roughly 2.5 to 1; average price target is $26. Those in the bullish camp are usually more positive on the ecnomic outlook and how that will impact PC growth in 2010, with margins the beneficiaries and believed to outpace the full year target. More cautious firms tend to believe the 2H offers some potential for disappointment, both on the top line and with margins, often viewing Q409 as the peak on the latter and noting that the stock has historically not traded well after gross margin tops out. More specifically for Q1, there did not seem to be much conviction that the release would be a catalyst in either direction: on the pro side, analysts believe near term operating momentum will continue and estimates will move higher; on the con side, expectations are believed to be pretty high and last quarter saw a post-release pullback despite upside results and guidance. Recent performance versus the Nasdaq and SOXX:
Since end of March: INTC +1% vs Nasdaq +2% and SOXX +3%
Since Q4 earnings on 14-Jan: INTC +5% vs Nasdaq +6% and SOXX +5%
Year-to-date: INTC +11% vs Nasdaq +4% and SOXX +8%