Evercore Sees Light At The End Of The Tunnel For PCs, Upgrades Intel To Buy

Intel Corporation INTC has underperformed other Semiconductors year-to-date, on concerns regarding a slowdown in the company’s Server business and sustained PC weakness.

Evercore’s C.J. Muse upgraded the rating on the company to Buy, while raising the price target from $38 to $45.

Data Center

Muse believes that the scenario is about to change for Intel, as DGC accelerates to more than 10 percent growth in the second half of 2016. This could be a meaningful catalyst to drive the stock higher.

Beyond this, the analyst believes there could be potential competition for some workloads in the Data Center business, although Intel is likely to be able to deal with the competition, given the ongoing innovation with the company’s Xeon processors, as well as the recent product introductions, such as FPGA, Optane and Silicon Photonics.

“Layer in a meaningful and perhaps misunderstood Networking opportunity as carriers upgrade their networks for 5G and the 50 billion coming connected devices, and we are comfortable underwriting a 12 percent growth CAGR for DCG,” Muse stated.

PCs

On the other hand, the analyst noted that PCs were tracking in the high single digits during Q3 and were expected to be “flat to modestly high” in Q4, indicating that the consensus expectations for CCG could prove conservative.

“Add in lower losses from memory, a plethora of other options that offer incremental upside, and an ongoing restructuring that should support a 30 percent operating margin into CY17 and we believe Intel can generate $3.00 in EPS in CY17 – nicely ahead of current consensus of $2.71,” Muse said.

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