Bank Of America: PC Sales Could Set Record At Intel

Vivek Arya of Bank of America Merrill Lynch reiterated a Buy rating on Intel Corporation INTC, while lowering the price target from $40 to $36.

Q1 Miss?

Although Q1 is expected to mark a trough in PC sales for the company, Arya explained that the rating had been maintained following the 11 percent year to date decline in the stock and that the Q1 miss already appears to be factored into the consensus expectations.

The analyst pointed out that Intel’s shares had rallied 12 percent from the preannouncement of the Q1 result to the end of 2015, significantly beating SOX, which declined 6 percent.

Related Link: Baird Upgrades Intel To Outperform

Growth Segments

Arya also pointed out that Intel’s data center business was “on verge of resuming double digit growth on imminent launch of Broadwell server,” with cloud capex expected to accelerate to 17 percent year on year in 2016, from 7 percent in 2015.

The analyst also believes that there was potential for a significant baseband modem win in 2H from iPhone 7, which was likely to drive both financials and the sentiment on the stock.

In addition, according to the Bank of America report, PC could represent less than 50 percent of the company’s sales for the first time in 2016, although “PCs remain critical to INTC’s ability to invest and fill up its manufacturing fabs.”