Intel: Notebook Growth Could Be Catalyst

Notebook growth could lift Intel stock to $30.
By Trefis ,

NEW YORK (Trefis) --Intel (INTC) - Get Report primarily competes with AMD (AMD) - Get Report in the microprocessor business which spans across notebooks, servers and desktops.

We estimate Intel's stock price at $26.28, which is about 21% above the current market price. Intel has been able to regain some of the market share it lost to AMD in previous years giving itself a solid foundation to grow as economy improves.

Although we currently show upside potential to Intel's stock based on our price estimate, Intel could reach $30 if we explore certain possibilities. As notebooks bring a significant amount of value to the stock, positive trends in this segment could lift the price estimate significantly.

We estimate that notebooks constitute about 47% to Intel's price estimate. This is primarily because of Intel's high market share in fast growing notebook market. Compared to desktops where Intel has little over 72% of market share, the company dominates notebooks with share of about 86%.

Additionally while server processors are as much as more than four times as profitable as notebook processors, Intel sells nearly eight times more notebook processors than server processors.

Currently we forecast global notebook shipments to grow from an estimated 160 million shipments in 2009 to about 260 million shipments by the end of our forecast period. This amounts to average annual growth rate of 8.5%.

However Acer's chairman J.T. Wang remains optimistic about sales of notebooks in future and believes that despite the competition from tablets, growing demand in the emerging markets will help drive notebooks sales. Thus, he believes that global notebook shipments will be able to sustain average annual growth rate of 20% for next few years.

If this is the case, Intel stands to benefit significantly. If global notebook shipments were to grow at a higher rate amounting to 350 million shipments by end of our forecast period, our price estimate for Intel could see addition of $4 and go past $30 mark. This represents an annual average growth rate of 14% over the course of our forecast period.

Growth in notebooks will not only be a result of incremental demand for PCs from emerging markets but also due to replacement of desktops. Thus, a faster growth in notebooks can be accompanied by a potential decline in desktop market which we currently forecast as more or less stable. Additionally, AMD will be looking to push into notebook processor market going forward. In a recent

article

, we noted the view of the Trefis community that AMD could potentially gain some market share in this segment.

Although risks exist, we believe if notebooks continue to grow at rapid pace, the benefits will far outweigh the risks and can potentially boost Intel's price estimate past $30.

You can see the complete $26.28 Trefis price estimate for Intel's stock

here

.

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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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