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Baird sees CPU shortage issues for Intel after channel checks, but reiterates US$64 price target on stock

Last updated: 22:45 20 Aug 2018 AEST, First published: 22:21 20 Aug 2018 AEST

An Intel logo outside its office
The chipmaker beat Wall Street’s estimates for its second-quarter profit and revenue as a surge in cloud computing lifted demand for chips

Analysts at Baird said Monday that their channel checks showed potential CPU shortage issues surfacing for Intel Corp (NASDAQ:Intel) that could result in some inventory depletion in the fourth quarter for the chipmaker.

However, the analysts saw strong demand in the third quarter from Intel’s hyper-growth data center (DCG) and client computing group (CCG), which includes Intel’s bread and butter PC processor and related component sales. 

“We recently raised our estimates on Intel's 3Q outlook, and our ongoing industry checks reinforce our confidence in the near-term strength of Intel's orders,” wrote Baird analysts Tristan Gerra and Maggie Sims.  

READ: Intel shares slip despite riding past 2Q market estimates thanks to demand for chips

They reiterated their US$64 price target and Outperform rating on Intel shares. Intel is currently trading flat around US$47.13.

The chip maker beat Wall Street’s estimates for its second-quarter profit and revenue as a surge in cloud computing lifted demand for chips. However, analysts are concerned Intel may be struggling with 10-nanometer process technology manufacturing in its Client Computing Group (CCG). 

“Very recent channel feedback informs us of potential CPU shortage issue surfacing for Intel, which could result in some inventory depletion in 4Q/1Q for Intel's CCG,” wrote Gerra and Sims.  

The analysts said Intel’s “limited CPU shortages” could be “resulting from a lack of 10 nanometer process output,” while end-market demand has “tracked above expectations year to date” for Intel's data center group business.

READ: Intel's stock downgraded by Goldman Sachs

“We are not changing our revenue outlook given 1). Any shortage likely will be offset by mix/ASPs; 2). Our checks continue to point to very robust computing demand trends for 3Q, including for DCG. Outperform-rated,” wrote the analysts.

Contact Uttara Choudhury at uttara@proactiveinvestors.com

Follow her on Twitter@UttaraProactive 

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