Why Analysts Can't Make Up Their Minds on Intel After Earnings

Intel Corp. (NASDAQ: INTC) reported its fourth-quarter financial results after the markets closed on Thursday. Overall, the report was overwhelmingly positive, seemingly giving more credence to the tech sector and specifically semiconductors. Analysts were quick to give their opinions on where the stock could go from here, and surprisingly they were fairly mixed on the stock.

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

For the fourth quarter, Intel said that it had $1.52 in earnings per share (EPS) and $20.21 billion in revenue. That compared with consensus estimates of $1.25 in EPS and $19.23 billion in revenue, as well as the $1.28 per share and $18.66 billion posted in the same period of last year.

For the latest quarter, data-centric businesses achieved record revenue, led by record Data Center Group (DCG) revenue. DCG revenue grew 19% year over year, driven by robust demand from cloud service provider customers and a continued strong mix of high-performance processors.

Internet of Things Group revenue was up 13% on strength in retail and transportation. Mobileye achieved record revenue, up 31% year over year on increasing ADAS adoption. Intel’s memory business was up 10% on continued NAND and Intel Optane bit growth. PSG fourth-quarter revenue was down 17%. The PC-centric business was up 2% on higher modem sales and desktop platform volumes.

Looking ahead to the first quarter, the company expects to see EPS of $1.30 and revenues over $19.0 billion. Consensus estimates call for $1.04 in EPS and $17.19 billion in revenue for the quarter.

Wedbush reiterated an Underperform rating and raised its price target to $52.50 from $46. In the report, Wedbush detailed:

Intel substantially exceeded expectations and guided for very strong Q1 results and better than consensus 2020 top-line and earnings results. Management, however, tempered expectations for the remainder of 2020 with Intel’s forecast implying Q2 through Q4 will show an aggregate decline in revenue.

Net, Intel’s guide is either: 1) a result of management being overly conservative around future cloud spending forecasts, or 2) an acknowledgement that a combination of slowing sales and increased competition will ratchet up pressure on INTC as the year progresses. We believe the reality is likely somewhere in the middle, and INTC is likely to see its momentum challenged by both AMD share gains and slowing in end-markets through the end of 2020.

Merrill Lynch reiterated a Buy rating and raised its price objective to $75 from $70. The brokerage firm believes that Intel is still very underowned and the beat was impressive considering capacity shortages and that competition is strong. The front-half guidance should actually de-risk its 2020 outlook. Merrill Lynch’s investment rationale:

Trading at a low valuation, Intel is a compelling large-cap investment levered to multiple secular advances (cloud, AI, 5G, autonomous cars, IoT). Our concerns re macro, competition, and 10nm product delays persist, but we think INTC’s expanding opportunity set, incumbency, scale, and large US manufacturing are tailwinds in a volatile macro environment. INTC’s transformation to a more data-centric (B2B) co could expand margins and FCF.

Here’s what some other analysts had to say:

  • Cowen maintained a Market Perform rating and raised its price target to $64 from $55.
  • SunTrust Robinson Humphrey maintained it as Hold and raised its target to $70 from $62.
  • Wells Fargo maintained an Equal Weight rating and raised its price target from $58 to $70.
  • Loop Capital downgraded the stock to Sell from Hold with a $59 target price.
  • Morgan Stanley reiterated its Overweight rating and raised its target to $71 from $66.
  • Bernstein has an Underperform rating and raised its price target from $42 to $50.
  • Nomura reiterated a Buy rating and raised its price target to $74 from $65.
  • UBS reiterated its Buy rating and raised its target price to $75 from $60.
  • Mizuho reiterated its Buy rating and raised its price target from $64 to $71.
  • Roth Capital reiterated a Buy rating and raised its target to $75 from $60.

Shares of Intel traded up 8.5% on Friday to $68.68, in a 52-week range of $42.86 to $68.75. The consensus price target is $58.28.