What Analysts Are Saying About Intel After Earnings

When Intel Corp. (NASDAQ: INTC) reported third-quarter financial results on Tuesday, it may have beaten estimates on both the top and bottom lines, but investors still sent the stock lower. Analysts took somewhat mixed positions on the stock as well, but more to the buy side.

24/7 Wall St. has included some highlights from the earnings report, as well as what analysts have said about Intel after the fact.

The company posted $0.80 in earnings per share (EPS) on $15.8 billion in revenue. Thomson Reuters consensus estimates were $0.72 in EPS on revenue of $15.58 billion. The same period in the previous year reportedly had EPS of $0.66 on $14.46 billion in revenue.

For its business segments the company reported:

  • Client Computing Group (CCG) revenue of $8.9 billion, up 21% sequentially and up 5% year over year.
  • Data Center Group (DCG) revenue of $4.5 billion, up 13% sequentially and up 10% from last year.
  • Internet of Things Group revenue of $689 million, up 20% sequentially and up 19% year over year.
  • Non-Volatile Memory Solutions Group revenue of $649 million, up 17% sequentially and down 1% year over year.
  • Intel Security Group revenue of $537 million, flat sequentially and up 6% from last year.
  • Programmable Solutions Group revenue of $425 million, down 9% sequentially.

Credit Suisse maintained its Outperform rating and $40 price target on Intel. The firm described its investment thesis for Intel as follows:

On INTC, our thesis remains intact as the Company begins to show operating leverage from prior investments, a scarcity value as most large cap tech companies have been choking investment in favor of financial engineering. In addition, INTC remains well levered to Data Growth not only in DCG but also IoTG. We believe a structural re-rating of the Company is warranted given our view that the Company’s business model/IP has significant barriers to entry (evidenced by one of the highest “R&D + CapEx to Revenue” ratio), and we continue to argue that Moore’s Law has been the cornerstone of Tech economics for 40 years and that INTC will be the Last-man-standing on Moore’s Law, leading to market share gains in Compute (including Mobile), as well as Foundry.

Argus reiterated a Buy rating with a $45 price target. The firm believes that Wall Street’s negative response to this guidance failed to discern positives in the picture, including the solid contribution from mobility to CCG revenue and the strong increase in cloud-based demand in DCG. As Intel succeeds in growing its focus areas while deemphasizing PCs, gross and operating margins should expand over the next several years. Intel remains an impressive cash generator, and its rich dividend yields about 2.8%.

S&P Equity Group has a Buy rating and a $41 price target. S&P said in its report:

We see revenues increasing 3.9% in 2017 following our outlook for a 6.3% rise in 2016. While Data Center revenue has grown below our expectations for three consecutive quarters and we acknowledge competitive pressures, we see growth accelerating in the second half as INTC benefits from higher demand/selling prices from the Broadwell ramp. We see PC related sales potentially better than expected in the coming quarters, should Windows 10 enterprise adoption begin taking place. While we still see a no-growth environment for PCs long term, we anticipate server growth, expansion into mobility and growth in the “Internet of Things” supporting higher revenue.

Merrill Lynch reiterated a Buy rating with a $42 price objective. According to the brokerage firm:

We rate Intel Buy based on solid long term growth in the data center/servers where it has 90%+ market share and which are being driven by emerging consumer cloud applications, and incremental opportunities in mobile, memory, and the internet of things. This combined with a manageable decline in the PC market, and restructuring initiatives should help drive near double digit earnings growth for the next few years.

A few other analysts also weighed in on Intel:

  • Sanford Bernstein has a Neutral rating with a $33 price target.
  • RBC Capital Markets reiterated it at Sector Perform with a $37 price target.
  • Deutsche Bank reiterated a Buy rating with a $42 price target.
  • Canaccord Genuity has a Buy rating with a $43 price target.
  • Morgan Stanley has a Sell rating with a $35 price target.
  • Nomura has a Buy rating with a $40 price target.
  • Jefferies has a Buy rating and a $46 price target.
  • BNP Paribas has a Neutral rating with a $36 price target.
  • Citigroup also has a Neutral rating with a $36 price target.
  • Needham has a Buy rating and a $42 price target.
  • Goldman Sachs has a Neutral rating with a $36 price target.
  • B. Riley has a Buy rating with a $46 price target.

Shares of Intel were trading at $35.37 on Thursday, with a consensus analyst price target of $40.06 and a 52-week trading range of $27.68 to $38.36.