Shares of chipmakers with a lot of exposure to the PC industry, like AMD and Intel traded lower as analysts raised concerns that those companies might not meet expectations as the laptop market continues to underperform.
Intel suffered as Bernstein downgraded Intel to underperform from market perform, and Deutsche Bank trimmed its estimates on Intel’s first quarter and lowered its price target by a dollar to $37.
In a note to clients, Bernstein analyst Stacy Rasgon said there is a possibility of a weak first quarter for Intel, even though the company didn’t issue a profit warning as some had expected. She believes that second and third quarter estimates are still too high, and that there could be a “meaningful reset” to full-year estimates when Intel updates its guidance in April.
“Over the last few weeks there has been much debate as to whether deteriorating industry data points might suggest an Intel preannouncement was in the cards. As of this writing the answer appears to be ‘no,’” she said. “However, we do not believe this means the company is necessarily out of the woods.”
AMD saw UBS lower its estimates for the next two fiscal years and suggested selling off stock. UBS said that it lacked conviction near-term that AMD can return to profitability and positive cash flow, given weak PC trends. It appears that UBS has not heard the AMD fanboy mantra which is essentially world peace and AMD profitability will return when Zen ships.
UBS analyst Stephen Chin believes much of AMD’s revenue recovery depends on PC demand improving, which he doesn’t see as happening. However, he is more optimistic about the prospect of gaming and virtual reality over the long term.
IDC expects PC shipments are expected to fall 10.6 per cent to 71.9 million in 2015, in what marked the largest decline in the market’s history, according to IDC, chipmakers have been working to diversify into newer lines of business, such as virtual reality, wearables and smartphones.
Chin believes Intel’s growth in data centres will also help the company wade through the PC challenges over the long term.
