Intel Corporation Draws a Price Target Lift; Here’s Why

MKM's Ruben Roy now spotlights 9% return potential for INTC shares, enticed by valuation ahead of what should be a "strong" 2018.


Chip investors are keeping their eyes peeled to this Thursday evening, when Intel Corporation (NASDAQ:INTC) is poised to deliver its last quarterly print of 2017. One bull throws his opinion into the ring ahead of fourth quarter earnings, dialing up the confidence factor on this giant on back of “compelling valuation.”

MKM analyst Ruben Roy believes 2018 is geared up to be a “strong year for the DCG business,” and in reaction, the analyst reiterates a Buy rating on INTC stock while bumping up the price target from $48 to $50, which implies a 9% upside from current levels. (To watch Roy’s track record, click here)

Regarding the fourth quarter, the analyst bets on Intel to deliver “in-line” results as well as for the first quarter guide of 2018. The Street is calling for Intel to deliver $16.3 billion in revenue and $0.86 in non-GAAP EPS.

“Our supply chain discussions indicate PC market conditions that were broadly in line with expectations for the December quarter (down high single digits) and expectations for a seasonal outcome in Q1. Server data points were more mixed but we continue to believe that overall trends remain positive and INTC will continue to see acceleration for its DCG business relative to easier 2017 comps. With respect to 2018 full year guidance, we expect INTC to provide a conservative initial outlook with low single digit year-over-year revenue growth and flat to slightly higher year-over-year EPS,” highlights the analyst.

However, even this bull acknowledges “Spectre/Meltdown impact remains unclear to us,” adding that “share price weakness appears to reflect negative expectations,” and these security challenges are likely to remain a point of “discussion […] through earnings season.”

The Intel team confidently dismisses concerns from where Roy stands, pointing to the fact that software update-correlated performance effects depend on workload, and therefore the company does not expect this to be meaningful for the average user. “We think that performance impacts will improve throughout the year and new hardware, expected by year end, should further improve the situation,” contends Roy.

Looking ahead, the analyst introduces new expectations for 2019, angling for EPS of $3.35.

TipRanks indicates optimism reigning majority opinion at the Street on this chip giant. Out of 25 analysts polled in the last 3 months, 16 are bullish on Intel stock, 7 remain sidelined, while 2 are bearish on the stock. With a return potential of 3%, the stock’s consensus target price target stands at $47.33.

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