Bank Of America Reiterates On Intel

Bank of America reiterated its Buy rating on Intel Corporation INTC Friday and maintained a $43 price target while naming it a Top Pick.

Analysts led by Vivek Arya continued “to like Intel on a stabilizing PC market, underappreciated growth in data center/internet-of-things, and a gradual reduction in losses in mobile.”

Arya saw “2016E EPS power of $3/share, and our projected double digit earnings growth trajectory has historically driven 15x-20x forward PE multiple vs. 15x currently.”

The $43 price target reflected a 15.3x PE applied to the firm’s 2016 EPS estimate. The choice of PE is a 10-15 percent premium to the broader market but in line with the 15x-20x forward PE range Intel achieved when its EPS was growing at the same 10 percent CAGR that the analysts projectfor the next 2-3 years.

Arya cited potential downsides: “1) Weaker than expected trends in mature PC market, which is largest revenue generator for Intel,2) Competition from ARM and other architectures in profitable data center market, 3) Inability to drive profitable growth in new mobile and foundry markets, 4) Increasing cost and complexity of semiconductor manufacturing that pressures capex and gross margins, and 5) Semiconductor and macro cycle risks.”

Intel closed Friday at $36.37, down 1.76 percent.