Intel Corporation (INTC.US) pre-performance Wedbush sings more: Q2 performance is expected to be strong, but market sentiment remains the biggest variable.

American chip giant Intel Corporation (INTC.US) will announce its second quarter earnings report after the US stock market on July 23. In response, investment bank Wedbush stated that Intel Corporation is expected to deliver "strong" performance, but investor sentiment remains a major uncertainty factor. In a report to clients, Wedbush analyst Matt Bryson wrote, "With revenue and profit margins expected to easily exceed second quarter expectations, and a similar situation possibly in the third quarter (benefiting from reduced operating expenses following another round of layoffs), we believe the market's expectations for performance will show a significant increase." However, he added, "However, as we have seen with Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR, even significant outperformance and a resurgence in sales growth are not enough to offset the selling pressure faced by the semiconductor/hardware sector. This selling pressure stems from some seemingly vague concerns, including China's progress in artificial intelligence, overall economic concerns (escalation of US-Iran conflicts, the impact of inflation on future US interest rate policy), and issues with data center spending (investment returns for hyperscale cloud computing companies, delays in data center projects, etc)." "While Intel Corporation may be better positioned to address at least one of these concerns, due to its current valuation being significantly above historical averages and higher than industry competitors, we believe it may be more susceptible to broader market fluctuations (unlike companies like Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR or NVIDIA Corporation)." Looking ahead to the upcoming earnings report, Bryson believes that the data center business may be the main driver of Intel Corporation's quarterly performance growth, with sales expected to increase by 10% quarter-on-quarter and 40% year-on-year. He stated that due to double-digit percentage growth in average selling prices (ASPs) this quarter, the company may also benefit from enhanced pricing power. Bryson further pointed out, "With Intel Corporation ramping up production of personal computer CPU at 18A process nodes, and shifting old process capacities to support server business growth, there may be a incremental increase in production. Therefore, we believe the server business is poised to exceed our revenue expectations." A similar situation may also occur in the PC processor business. Despite weaker-than-expected sales performance, product pricing remains strong. Explaining, Bryson said, "Furthermore, this pricing trend is expected to continue into the third quarter (where we again forecast a slight growth), making us believe that Intel Corporation is more likely to exceed revenue expectations rather than disappoint." Finally, Bryson expects that due to the strengthened pricing power mentioned above, Intel Corporation's profit margin performance will be "significantly higher than previously expected," and this trend may continue for several quarters. Bryson gives Intel Corporation a "neutral" rating with a target price of $95.