What Can Intel Tell Investors?

Intel is set to report its first quarter earnings after the market close on Tuesday, and equity analysts are expecting good news for the quarter and beyond -- albeit with a hint of caution.
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NEW YORK (TheStreet) -- Intel (INTC) - Get Report is set to report its first quarter earnings after the market close on Tuesday, and equity analysts are expecting a lot of good news for the quarter and beyond -- albeit it with a hint of caution.

PiperJaffray

analysts, for example, are still reiterating their overweight recommendation for Intel stock, with a $30 price target.

"We believe that INTC is in its best competitive position in many years, heading into what we believe will be a period of strong demand for PCs," Piper Jaffray analyst Auguste Gus Richard wrote in a note to investors. "We believe that the shares are inexpensive based on our CY (calendar year) 10 estimates, which are likely to move higher post earnings report."

PiperJaffray analysts believe that the factors that will contribute to new historical highs for Intel's gross margin this year are high utilization rates as capacity stays tight; limited competition from rival

Advanced Micro Devices

(AMD) - Get Report

, resulting in moderating price reductions; a mix shift to corporate demand; and a good mix of high margin servers and declining start-up costs through the end of the year.

Equity analysts covering the semiconductor space generally seem to agree that Intel is overshadowing Advance Micro Devices of late, due to certain long-term advantages, including technology innovations that should benefit Intel as the semiconductor industry rebounds,

Morningstar

analyst Andy Ng noted.

"Intel is the dominant force in the roughly $30 billion computer processor market," Ng wrote in a note to investors.

Ng added that Intel has an "unmatched" research and development budget, but noted that the maturation of the PC market could become one of the company's biggest obstacles in the future.

Furthermore, rival Advanced Micro Devices's acquisition of

ATI

several years ago has given Intel's smaller rival the knowledge and technology to make available platform solutions too, Ng pointed out.

Analysts at

Goldman Sachs

are focused on Intel's inventory situation ahead of its first-quarter earnings release, and noted that Intel's "dollar inventory" will probably be up sequentially again in the quarter as higher-cost 32nm wafers hit the balance sheet.

Still, "we believe unit inventory growth will be modest and also necessary given strong PC sell-through and still very low MPU (microprocessor) unit inventory levels," Goldman Sachs analyst James Covello noted.

Although Covello wrote that he believes Intel's second-quarter revenue guidance "will be for a slight decline (typical seasonality) off of a high base," he also expects rival Advanced Micro Devices "2Q results to lag."

Finally, UBS says to expect "flattish sales" for Intel ahead of seasonal second half growth, but to "note as the mix has shifted ... where processors enter the supply chain earlier, the historical 2Q seasonal decline has moderated."

-- Reported by Andrea Tse in New York

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