Intel is the company up for debate in today's Stock Brawl at 3:40pm ET on“Closing Bell.”
With a market capitalization of $109.5 billion, this 42-year-old company is the largest semiconductor maker based on revenue, and has consistently ranked as one of the most recognizable and valuable brands in the world. Intel's chief Paul Otellini sees “strong demand from corporate customers.”
However, if you look at the stock, investors have not been rewarded. Over the past three months, Intel is down about 10 percent for the period. And the past 52-weeks, Intel shares are up only 7 percent.
Wall Street remains divided on Intel. Here's why:
Making Their Case: The Bear
Tristan Gerra, Senior Semiconductor Analyst, Robert W. Baird & Co.
On August 10, Gerra downgraded Intel to “neutral” from “outperform” based on a sharp deterioration in PC-related order trends in the first week of August. Gerra also reduced his 12-month price target on the stock to $22 from $30.
Because Intel derives 90 percent of its revenue from the PC market, Gerra believes any slowdown in PC growth could impact the company's revenues and profitability. He also believes hopes of a significant rebound in orders for September are increasingly unlikely.
Strategically, Intel has decided to enter or attempt to create a number of new markets. Gerra points out that the consumer electronics and mobile phone markets which Intel is targeting have below-corporate-average gross margin. According to Gerra, the MID market hasn't taken off and Intel's entrance into the high-end graphics market with Larrabee will be competing against very knowledgeable competitors ATI and Nvidia .
Making Their Case: The Bull
Mark Stahlman, Partner at TMT Strategies
Intel’s Q2 earnings reported revenue of $10.8B, which is up 34 percent year-over-year, and net income of $2.9B.
Stahlman likes the fact that “[Intel] publicly committed to a double-digit growth rate on their top line and bottom line.” He adds, “They have never done that before. This is a very significant step.”
Stahlman believes Intel is a major player in smartphones with the potential of becoming a major player in other portable devices such as the tablet. He also points out that the tech titan has also "built an incredible collection of strategic partners—Google and most of Silicon Valley included."
Bottom line, Stahlman says Intel “should be taken very seriously…They’ve not only got a lock on current markets, but expanding to areas where they do not have share.”
Crystal Lau and Donna Burton contributed to this post.
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