Ascendiant's Acree Upgrades Intel, Says PC Weakness 'Factored In'

Intel Corporation INTC reported stronger-than-expected second quarter results after Wednesday's market close. In a report, Ascendiant Capital Markets analysts Cody G. Acree and David N. Williams upgraded shares of the company to hold as PC weakness looks already factored in.

“While computing trends have been incrementally bearish, Intel’s results were marginally better than expected, with most negative investor sentiment likely already reflected in the firm’s shares,” the analysts explained. Although they continue to be cautious, they think much of the basis for their previous Sell rating has already played out.

Related Link: Intel… The Day After The Beat

The analysts highlight three main points to their investment thesis:

1) Intel’s strength in the data center arena seems to be offsetting much of the PC market’s secular declines. In addition, Ascendiant’s prior concerns of mobile losses are largely counterbalanced by increasing profits in memory and IoT. However, it should be noted that the firm’s upgrade is not optimistic, but just seeks to reflect more realistic expectations for the company.

2) The guidance for the second half of the year is less pessimistic. Data centers, IoT, memory and other non-PC segments could drive smaller-than-expected revenue declines.

3) The company also made a considerable adjustment to its process node cadence. Management now projects “design shrinks every 2 ½ years versus the prior two year pace.”