Loading...
Loading...
In a report published Monday, Morgan Stanley analyst Joseph Moore downgraded shares of both
Altera CorporationALTR and
Xilinx, Inc. to Equal-weight on concerns that
Intel CorporationINTC might "price aggressively" longer term.
"While we can see why Intel might be interested, and we like Altera's business and franchise, we see relatively limited potential for strategic or cost synergies," Moore argued. "Further, we see limited potential accretion for Intel particularly when comparing to other uses of cash (i.e., stock buyback, as the net cost of buying Altera would likely be roughly 2 years of Intel free cash flow ex dividend)."
Moore continued that nevertheless an acquisition could be a "good deal" for Intel, just not one that could be a meaningful driver for the stock. A hypothetical combination would diversify Intel's end market exposures only "slightly" as Altera would account for just over three percent of revenues, growing five percent to seven percent long term.
As for Altera Moore is "stepping to the sidelines" as shares now trading above intrinsic value as shares closed Friday at $44.39. Absent any M&A activity, with an estimated five percent to seven percent growth rate, it would take several years for the stock to get to its current levels.
Moore also noted that Xilinx has several short-term concerns, specifically FPGA pricing discipline may erode if Altera becomes a part of Intel. The analyst argued that it is "hard for us to imagine" Intel passively accepting a 42 percent FPGA market share in a duopoly and not using its foundry margin as a weapon.
Loading...
Loading...
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
date | ticker | name | Price Target | Upside/Downside | Recommendation | Firm |
---|
Benzinga simplifies the market for smarter investing
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
Join Now: Free!
Already a member?Sign in