Intel Corporation (INTC) Gets A Price Target Boost From Loop Capital; Here’s Why

Betsy Van Hees views INTC as far more than simply a "PC company," now more than ever before.


Intel Corporation (NASDAQ:INTC) shares are rising 5% after quite a massive, “impressive” third quarter masterful serve, leading Loop Capital analyst Betsy Van Hees to commend the chip maker for “firing on all cylinders.”

With even more confidence now on the tech player’s opportunity, the analyst maintains a Buy rating on INTC stock while hiking the price target from $45 to $49, which represents a close to 13% increase from where the stock is currently trading. (To watch Hees’ track record, click here)

For the third quarter, the chip maker saw pro forma EPS reach $1.01 on back of a quarter-over-quarter 9% rise of revenue to $16,149 million, far surpassing the Street’s and Hee’s expectations for $0.80 in pro forma EPS and $15.73 billion in revenue. Notably, Intel’s revenue hit towards the tail-end of its guide ranging between $15.2 and $16.1 billion, with EPS meaningfully topping the outlook of $0.75 to $0.85.

“The EPS beat was driven by solid platform execution, strong growth from adjacent products and businesses, lower spending, and monetizing some of the ICAP (Intel Channel Alliance Program) portfolio positions that resulted in a gain of $0.13,” writes the analyst, who likewise highlights Intel’s persistent attention to keeping an eye on spending and reigning in expenses. Pro forma operating margin (OM) rose from 28.2% in the second quarter to 34.4% in the third quarter, with operating expenses (OpEx) taking a step down from $5.13 billion in the second quarter to $4.78 billion, “well below” Intel’s expectations for $5.1 billion.

For the fourth quarter, Intel set the revenue outlook to $16.3 billion, give or take $500 million leeway, topping the Street’s $16.10 billion. Pro forma gross margin (GM) guidance landed at roughly 63%, with OpEx at $5.1 billion and EPS set for $0.86 plus or minus $0.05, outperforming both the Street’s as well as the analyst’s forecast of $0.83. In reaction, the analyst has tweaked her own fourth quarter expectations to align with the midpoint of the outlook ranges, looking for $0.86 in pro forma EPS and $16.3 billion in pro forma revenue.

One strength of Intel’s print points to yet another full-year 2017 revenue lift, with Hees noting “this time,” the chip maker’s team is increasing the guide by $700 million to $62 billion, with pro forma EPS rising $3.00 (plus or minus 5%) to $3.25 (plus or minus 5%). Intel’s guide benefits from rising PC demand, the analyst opines, likewise highlighting lesser spending as well as $0.06 in ICAP gains. In turn, the analyst his tweaking her full-year 2017 pro forma projections to align with the midpoint of the guides for $3.25 in EPS and $62.0 billion in revenue, while also adjusting full-year 2018 expectations and introducing forecasts for 2019.

Hees surmises on a note of tremendous confidence following the chip maker’s standout quarterly grand slam: “While we have been upbeat on INTC as we believe the company is firing on all cylinders as it impressively executes its transformation beyond being just a PC company, what positively surprised us was: 1) despite the PC industry being in a secular decline, CCG revenue increased 7.9% QoQ, 2) even though there continues to be headwinds in enterprise, DCG got back to double-digit QoQ growth increasing 11.6% QoQ, and 3) the signing of long-term NAND supply agreements that will provide more than $2B in prepayments (received $1.0B in Q3 2017) through 2018.”

Wall Street is fairly positive on the semiconductor stock, as TipRanks analytics exhibit INTC as a Buy. Out of 24 analysts polled by TipRanks in the last 3 months, 11 are bullish on Intel stock, 9 remain sidelined, and 4 are bearish on the stock. With a loss potential of nearly 8%, the stock’s consensus target price stands at $39.89.