Intel Still A Top Buy

12/19/2011


Intel ($24; INTC) issued December-quarter guidance that disappointed investors, sparking a two-day decline of 6%. The semiconductor giant now expects revenue of roughly $13.7 billion, $1 billion below earlier guidance. Intel projects sales of personal computers will rise in the quarter but says customers all over the globe are cutting back on microchip purchases because of a shortage of disk drives.

The disk-drive shortage is not a surprise, as the floods in Thailand have idled many plants. While the shortages will extend into the March quarter, Intel expects the PC supply chain to start rebuilding chip inventories sometime in the first half of 2012, once disk-drive supplies improve. Most of Thailand's floodwaters have drained, with some drive makers already restarting production.

Even before the flooding, economic uncertainty and the increasing popularity of tablet computers and smartphones suggested PC demand could slow. However, the consensus projects per-share-profit growth of just 5% for Intel in 2012, a conservative target. At just 10 times trailing earnings, Intel discounts plenty of bad news. The stock retains its Focus List Buy and Long-Term Buy ratings.

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