Intel, An Emerging Growth Story?

Intel Corporation (INTC-NYSE) does not seem to get the attention that it once used to garner, but has not lost its place among America’s largest corporations, as its $120 billion market cap can attest.

Analyst color on the stock is still easy to come by, however. ThinkPanmure has hired two analysts to replace Eric Ross, who decamped to Canaccord Adams to become head of U.S. equity research, and are initiating coverage on the stock with a buy.

We are initiating coverage of Intel Corporation (INTC) with a Buy rating and $29 price target, based on 19x our 2009 EPS estimate of $1.53. We believe that Intel is gaining market share in the server, desktop, and notebook markets at the expense of Advanced Micro Devices, given its financial and technology issues. We believe Intel will start to see improvements in gross margins with less drag from NOR and NAND flash. While we believe Intel’s new Atom processor will not contribute much to the top line in the near term, it is an emerging growth story, in our opinion. ThinkPanmure Note

Intel an emerging growth story? Sure…

The Atom processors have lower average selling prices and gross margins but are seeing good growth. The Atom processor at 45nm, which has lower price points, should still enable Intel to hit its 57% gross margin target for 2008. While the Atom processor margins are 11% lower than the dual core processors’, given that Intel ships processors into 200M+ notebooks and desktops, for Atom to be impactful or get to even 10% of revenues, the low-cost PC market has to get to 20 million units, which probably will not be until 2010, based on our estimates. The sub-$300 PC market could see rapid growth with Asustek, Hewlett-Packard, Dell, and the One Laptop Per Child (OLPC) initiative and overall market growth moving to more price-sensitive emerging economies, but still be small compared to the 300M unit PC market.

Intel remains 6 to 9 months ahead of AMD in many crucial areas, and should be able to blunt AMD’s quad core 45mm product line. Next generation 32mm chips are due in early 2009, and Intel is likely to remain ahead of their pesky competitor for a long time. Like, ever.
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