The shares of two major chip makers are moving in opposite directions after they reported their results last night, as Qualcomm (QCOM) is rising and Intel (INTC) is falling. Goldman Sachs reacted to Qualcomm's quarterly report by upgrading the stock to Conviction Buy, while two research firms had very different views on the implications of Intel's report.
GOLDMAN UPGRADE: Qualcomm benefited from strong chipset sales amid improved demand for low-end smartphones, according to Goldman analyst Simona Jankowski, who upgraded the stock to Conviction Buy from Buy. Also helping the company was an increase in the amount of royalty payments it received from Chinese companies, the analyst stated. Heading into fiscal 2017, the chip maker's revenue growth should accelerate as it obtains more revenue from Samsung devices and Chinese original equipment manufacturers, Jankiowski predicted. Moreover, the Street's estimates for Qualcomm are poised to increase, as analysts are underestimating the positive impact that the company's new products will have, said Janowski, who raised her price target on the stock to $70 from $64.
INTEL BATTLEGROUND: Jefferies analyst Mark Lipacis noted that Intel expects its revenue from data centers to accelerate in the second half of this year because the visibility of its orders from cloud vendors has increased. The analyst wrote that this outlook is consistent with trends uncovered by Jefferies' checks. Meanwhile, Lipacis expects Intel's gross margins to rise by five percentage points by the end of 2017, driven by lower start-up costs, higher selling prices, and better unit costs. Predicting that Intel's 2017 EPS will beat expectations by at least 53c, Lipacis raised his price target on the stock to $44 from $42 and kept a Buy rating on the shares. Conversely, Citi's Christopher Danely wrote that Intel's "warning signs" are "multiplying like bunny rabbits." Among the warning signs are "near-record inventory, slowing data center growth, and aggressive guidance" for the second half of 2016, the analyst stated. The company's strong 2H16 guidance is based mostly on its forecast for an acceleration of its data center business, but its data center metrics have come in below expectations for the last four quarters, according to Danely, who kept a $35 price target and Neutral rating on the shares.
PRICE ACTION: In late morning trading, Qualcomm rose 7.7% to $60.10 and Intel fell 4% to $34.22 per share.
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