Intel’s (INTC) Q4 results might benefit from data center, PC market recovery

Intel Corp. (NASDAQ: INTC) faced multiple challenges last year, including the general slump in the chip market that weighed on its overall performance. When the chip-maker unveils its fourth-quarter numbers Thursday after the closing bell, the focus will be the data center business.

Also read: Intel Q3 2019 Earnings Conference Call Transcript

The data center segment has been on an upswing, aided by the growing demand for cloud-based solutions among enterprises. The popularity of the Optane DC Persistent Memory modules has been growing steadily. The memory tier, which features the 3D XPoint technology co-developed with Micron (MU), is designed to meet the growing demand for high-performance products. It is estimated to have contributed to revenue growth this time.

Headwinds Persist

On the other hand, the client computing business continues to be affected by the ongoing semiconductor slowdown, though a modest recovery in the PC market has come as a relief to the tech giant. Also, issues related to the production and shipment of 10nm CPUs persisted in the to-be-reported quarter, adding to the pricing war and growing competition from Advanced Micro Devices (AMD). The fact is that Intel is facing competition from multiple areas, including the networking and server markets.

Mixed Outlook

There have been concerns about the management’s inability to execute and ensure an adequate supply of products. While the market, in general, has a bearish view of the stock’s post-earnings performance, a section of analysts is optimistic about the recovery of the PC business.

Wall Street’s view is that things didn’t change much in the final months of fiscal 2019 and predicts a 2% decline in fourth-quarter earnings to $1.25 per share. Revenues are seen rising 3% annually to $19.22 billion, which is broadly in line with the management’s forecast.

Q3 Results

In the third quarter, revenues remained flat as the Client Computing segment recorded a year-over-year decline, which was partially offset by growth in the other segments. The top-line was hurt by lower volumes in the main segments. Adjusted earnings edged up 1% and exceeded estimates.

Related: TSMC Q4 2019 Earnings Snapshot

Intel’s shares gained 30% in the past twelve months and reached a ten-year high at the beginning of the year. However, the company under-performed most of its peers and the broader market during that period. Analysts have a mixed view when it comes to recommendations, with a target price of about $60 that represents a 2% downside.

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