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Intel Notebook Can Boost Stock Price

Trefis revises price estimate for Intel stock from $22 to $23.37, in part to reflect improved outlook for Intel's notebook and server processor margins.
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NEW YORK (TheStreet) - Intel (INTC) - Get Intel Corporation Report, in its latest quarterly earnings reported better than expected average selling prices for its notebook and server processors, led by a fast ramp up of its new Core product series and Nehalem EX series. Strong demand for its new products prompted Intel to increase its profit margin guidance to 64% for 2010, up from an earlier estimate of 61%.

We have revised upward the

Trefis price estimate for Intel's stock

from $22.00 to $23.37, in part to reflect our improved outlook for Intel's notebook and server processor margins, which will benefit from higher demand for Intel's new generation of processors.

We estimate that Intel's notebook processor business constitutes 46% our price estimate for Intel's stock while the company's server processor business constitutes about 23% of Intel's stock. In comparison, 46% of AMD's stock comes from the company's server processor business.

Below we discuss how increasing demand for new processors will improve EBITDA margins for Intel's notebook processor and server processor divisions.

New Core Series to Increase Intel's Notebook Processor Margin

Strong demand for the new generation of 32nm notebook processors known as

Core i3, Core i5 and Core i7

, resulted in higher processor ASPs for Intel. This led to 43% year on year increase in Intel's revenue from PC processors.

We estimate that strong demand and improved ASP for Core product series will increase Intel's

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notebook processor EBITDA margin

from 47% in 2009 to 50% in 2010.

Intel expects demand for its Core product series to persist throughout 2010 as businesses renew their PCs after having held off throughout the recessionary environment of the past two years. To meet the expected demand, Intel will be ramping up production of its 32nm processors much before its earlier planned schedule.

Nehalem EX Series to Boost Server Processor Margin

The growth momentum for Intel's next generation Nehalem EX server processors in the fourth quarter of 2009 continued in the first quarter of 2010 as well. While fourth quarter growth was dominated by large businesses renewing their servers, the first quarter saw increased demand from small and medium businesses. As a result of higher ASPs and increased unit sales, Intel's server processor revenues increased 48% on a year over year basis.

We estimate that the continued strength in demand will lead to increases in

server processor EBITDA margin

from 52% in 2009 to 53% in 2010.

For additional forecasts and analysis, here is

our complete model for Intel's stock.


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