Intel Corp. (NASDAQ: INTC) and Wal-Mart Stores Inc. (NYSE: WMT) are both very important barometers of the U.S. economy. Intel is for PCs and technology, and if the retail sector is gaining or losing it will of course show up in Walmart. That being said, it is interesting when you see two analyst calls from the same firm on the same day on very different Dow Jones Industrial Average components. Bank of America Merrill Lynch has some positive calls on both stocks but you may have to read between the lines a bit here.
The Intel Corp. (NASDAQ: INTC) call is confusing on how “positive” it is because the firm lowered the objective price target on Intel’s common stock to $30 from $34 as it was previously expecting. Its earnings expectation has been cut in years 2012, 2013 and 2014 as follows, respectively: $2.36/$2.46/$2.75 to $2.20/$2.30/$2.55. How can these cuts be taken as good? Simple. The call says that the weakness is baked into the price of the stock now. BofA cited Intel’s ability to reliably produce the lowest-cost and highest-performance silicon to maintain a dominant position in servers and data centers and also to transition from legacy PCs to next-gen smartphones, tablets, Ultrabooks and other converged devices. The firm sees that next week’s Intel Developer Forum will feature 22nm Haswell processors that consume less power with ~2x the graphics performance. It also believes that Intel holds a one- to four-year lead over TSMC and Samsung. While the target was cut to $30, the consensus target from Thomson Reuters is only $28.66 and the implied upside for the stock is expected to be more than 22% based on the call.
Wal-Mart Stores Inc. (NYSE: WMT) is also positive as the analyst says to buy the stock ahead of the fall and holiday season and ahead of the October analyst meeting. The firm reiterated its Buy rating with a price objective of $85 on this stock. The company’s ad campaign should drive sales and traffic up by one full point. It believes that Walmart saw strong back-to-school sales and believes its expanded holiday layaway program will all help along with its more locally relevant assortments. This price target is almost $9.00 higher than the Thomson Reuters consensus and it is only $1 shy of the highest analyst price target.
JON C. OGG