Wall Street bracing for bullish Intel update

A day ahead of a scheduled update from Intel Corp, investors are gearing up for a strong forecast. The downside: shares of the world's largest chip maker, which have outperformed rivals this year, could suffer if the company is less than optimistic. "Earnings estimates for Intel are rising," said Marshall Front, chairman of Chicago-based Front Barnett Associates, which manages about 1.7 million Intel shares. "Some people may have bought the stock in the anticipation of another ratcheting up" of financial targets, he said.
In January, Intel said it expected revenue in the first quarter, historically its weakest period, of $8.8 billion to $9.4 billion.
The mid-point of the range would be down about 5 percent from the fourth quarter, a bit better than the historical average of a 7 percent drop.
Since Intel has 14 weeks in the current quarter, one more week than usual, that forecast is conservative, said Ben Lynch, an analyst with Deutsche Bank. "We believe there is slight upside" to the forecast, he wrote in a note to clients.
On average, Wall Street appears to accept that thesis. Published analysts' forecasts average $9.13 billion, just above the midpoint of Intel's targets.
Christopher Danely, who covers Intel for J.P. Morgan, said he expects Intel to trim $200 million from the bottom end of the company's range in its forecast update on Thursday.
He points to strong demand for Intel's notebook computer chips, which are so hot that there are some shortages in Asia.
"Intel is one of our favourite large-cap semiconductor stocks," he wrote. One reason, he said, is the "potential for upside to consensus estimates."
The likelihood of Intel raising its revenue forecast may already be baked into its current stock price, which is up 6 percent this year.
That's well ahead of rival Advanced Micro Devices Inc, whose stock is off 22 percent this year.
In the options market, sentiment has also been bullish heading into the update, said Frederic Ruffy, an analyst at Optionetics, an options analysis firm.
Front, who has owned Intel shares on and off for 20 years, said they could be hit if the company is less than bullish on Thursday, though he said one can never be certain of the market's mood.
Intel shares on edged up 5 cents to $24.85 late Wednesday.