As Intel Lifts Guidance, Argus Raises Price Target To $45

Intel Corporation INTC raised its Q3 top-line guidance, citing better PC matrices. The company could generate margin expansion over the next several years, provided it is able to successfully “grow its focus areas while deemphasizing PCs,” Argus’s Jim Kelleher said in a report. He maintained a Buy rating on Intel, while raising the price target from $41 to $45.

Intel announced an upward revision in its Q3 revenue estimate from $14.9 million, plus or minus $300 million, to $15.6 billion, plus or minus $300 million. The non-GAAP gross margin forecast has been raised by 100bps to 63 percent at the midpoint, reflecting volume leverage on higher PC production.

“We regard the higher level of PC sales as somewhat seasonal and mainly related to inventory replenishment at distribution,” analyst Kelleher mentioned.

Transaction With PE Firm

Intel has recently announced plans to partner with private equity firm TPG to jointly invest in a spin-out of Intel Security, which was formerly known as McAfee. The transaction values the business at $4.2 billion.

While Intel would not recover the complete investment of $7.7 billion it made in McAfee, the company would receive $3.1 billion in cash from TPG and retain a 49 percent stake in Intel Security, Kelleher noted.

Beyond PC

“Assuming Intel succeeds in growing its focus areas while deemphasizing PCs, the company’s gross and operating margins should expand over the next several years. Intel remains an impressive cash generator, and its rich dividend yields about 2.8%,” the analyst wrote.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!