Intel Can Run To $29 With Surprisingly Strong PC Market

Intel reported its third-quarter 2011 earnings last week, and based on continued growth in microprocessor shipments and stable pricing

compared to last quarter, we have updated our price estimate for Intel stock to $29. The earnings was a surprise to everyone, especially

because there was a general consensus that the PC market is showing signs of weakness. Nevertheless Intel, whose rival, Advanced Micro

Devices, reports next week, continued its exceptional revenue growth riding on support from emerging markets and enterprise spending.

While Apple’s iPad and other tablets may be booming, it seems like PCs aren’t going down anytime soon. See our full analysis for Intel

Emerging Markets Drive Shipment Growth While the consumer demand for PCs in developed markets such as the U.S. and Western Europe

remained sluggish, it was more than compensated by consumer demand in emerging markets. The company mentioned that the growth in China,

India, Turkey and Indonesia increased by low to high double digits. [1] In fact, China and Brazil now appear in world’s top three PC

markets.

We earlier proposed that due to the microprocessor mix shifting to emerging markets, the average processor pricing could go down and

affect revenues. However it seems that this is not the case as Intel mentioned that average selling prices remained flat compared to Q2

2011. In fact the consumers in emerging markets such China are buying upscale PCs.

We forecast significant ASP increase in 2011 overall, due to the launch of Sandy Bridge. Nevertheless going forward we expect prices to

go down due to manufacturing efficiency and competition.

Enterprises Are Buying Too Besides aid from emerging market consumer demand, Intel is enjoying the purchase of PCs from enterprises. This

is surprising and given the global economic state, one would have expected enterprises to be more cautious. However this does not seem to

be the case. Recently, IBM also beat earnings estimates and reinforced the notion that the corporations are willing to spend on

technology to improve productivity. Our price estimate for Intel stands at $29, implying a premium of about 20% to the market price.