Why Analysts Are Bullish on Intel
Intel stock underperforms its peers
Intel (INTC) has dominated the semiconductor industry for many years with its PC (personal computer) and server chips. Despite its strong fundamentals, the company’s stock has underperformed its peers for several years.
In 2017, when the semiconductor market was hot, Intel returned 30%, whereas its peers Micron Technology (MU) and NVIDIA (NVDA) became the top two fastest-growing semiconductor stocks of 2017, delivering returns of 80%–90%.
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Analysts’ bullish ratings for Intel and its peers
In 4Q17, Intel joined the semiconductor momentum and started to show upside potential. This made Wall Street analysts bullish on the stock after a very long time. In October 2017, bullish analysts raised their 12-month price target for Intel by 26% to $58, and when the stock’s price neared $50 in February 2018, they raised their bullish target by another 3% to $60.
Analysts also raised their bullish price targets for Advanced Micro Devices (AMD) and NVIDIA by 23% and 11%, respectively, in February 2018. Let’s take a look at the factors that made analysts bullish on Intel and its peers.
According to CNBC, Citi Research analyst Christopher Danely had a price target of $58 for Intel, representing an upside potential of 14.3%. He moved the stock’s ranking from third to first on February 27, 2018, as he expects the company to report better-than-expected earnings in 2018.
Referring to Danely’s note to clients, CNBC stated that Danely believes Intel is the Micron of 2018, meaning Intel stock could be among the top performers of 2018. Danely said that like Micron, Intel also has a lower valuation than its peers and strong upside earnings potential.
This upside earnings potential could come from strong demand in the enterprise end market, from which Intel earns 50% of its revenue. Danely noted that NVIDIA, Cisco, and Lenovo stated that the corporate business environment is strong, which means there’s been a lot of buying by enterprises. This trend was visible in 4Q17 as Intel’s data center revenue rose 20% YoY (year-over-year). Danely expects this trend to continue in 2018 as the improving economy and the tax reform encourage spending in the United States.
Danely expects Intel’s EPS (earnings per share) to reach $3.57 in 2018 compared to the consensus estimate of $3.55, and he expects Intel’s 1Q18 EPS to reach $0.78 compared to the consensus estimate of $0.71.
Danely’s comments were supported by other bullish analysts. We’ll take a closer look at their comments next.