By IB Staff Reporter: Subscribe to IB's RSS feed
September 2, 2010 9:08 AM EDT
Shares of chip giant Intel could outperform rival Texas Instruments (TI) in the near term, an analyst at FBR Capital Markets said, adding that TI could narrow its third quarter forecast next week, when it hosts its mid-quarter update.
Analysts expect semiconductor firms to suffer in the near-term, as downstream customers no longer replenish inventory and could begin to de-stock inventory, a "triple whammy" impact on revenues and earnings.
"Market Perform-rated shares of Intel could outperform TI as Intel already preannounced 3Q revenues, de-risking the ship-ahead issues that could impact the sector in coming quarters," analyst Craig Berger said in a note to clients.
Meanwhile, compared to S&P 500, Intel shares have already declined by 25 percent since April 15, while TI shares have only declined by 13 percent since April 26.
However, Berger prefers "outperform"-rated TI versus "market perform"-rated Intel, as TI only has 12 percent market share in its core markets compared to Intel's 90 percent.
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"TI has 300mm analog cost benefits, scale benefits, and cross-selling benefits versus competitors; TI is in a sweet-spot of the chip sector, selling analog power management chips into portable devices of all kinds," Berger said.
"Intel's thrust into the mobile and security markets raises execution and integration risks versus TI," Berger added.
The analyst, who has a $36 price target on TI stock, also said TI could narrow its third quarter forecast next week, when it hosts its mid-quarter update, an analyst with FBR Capital Markets said adding that the
Analyst Berger said TI could narrow its third-quarter earnings forecast in a midpoint of 68 cents a share to 72 cents a share, compared to its earlier 69 cents a share midpoint.
The analyst said the firm would narrow its third quarter revenue outlook around the midpoint of its existing range of $3.55 billion to $3.85 billion, possibly to $3.63 billion to $3.77 billion.
Wall Street expects the firm to earn 69 cents a share on revenue of $3.69 billion, according to analysts polled by Thomson Reuters.
"While we do think TI has seen some shipment volatility in its consumer and PC chip businesses (which are rather small) as downstream customers begin to deplete inventories, we think the firm continues to benefit from strength in industrial and automotive shipments, and some analog share gains in wireless and other areas," Berger said in a note to clients.
The analyst remains constructive on TI given the firm is building barriers to entry and competitive advantages with its leading analog market share, 300mm manufacturing strategy, counter-cyclical capacity investments and portfolio cross-selling capabilities.
Shares of Intel closed Wednesday's trading session at $23.75, while TI shares ended at $18.14.
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