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Bernstein's Bearish Stance On Intel No Longer Justified

Bernstein's Bearish Stance On Intel No Longer Justified

Intel Corporation (NASDAQ: INTC) reported its first quarter results, which prompted a notable bear analyst to upgrade the stock.

The Analyst

Bernstein's Stacy Rasgon upgraded Intel from Underperform to Market Perform with a price target lifted from $38 to $54.

The Thesis

Rasgon's prior bearish stance was based on several factors, some of which were debunked in Intel's' earnings report. Intel's stock was downgraded in February due to, among other reasons: slowing growth in datacenter, less attractive businesses driving growth and the stock's expensive valuation on a free cash flow basis.

The datacenter business "very unexpectedly" inflected in the fourth quarter and the strength seen in the first quarter is sustainable throughout the start of the second quarter. Beyond the second quarter, "a little math and some reasonable assumptions" suggests the datacenter business should see growth in the 15 to 20 percent range. Intel also "reversed themselves" in terms of its spending outlook as CFO Bob Swan "put spending constraints into place," the analyst wrote.

Remaining elements that contributed to Rasgon's bearish stance "continued to play out" in the first quarter. As such, an upgrade to Market Perform is warranted and further upgrades may be possible in the future. But for the time being, the analyst says now is the time to "take our medicine and admit" a bearish stance was "wrong."

Price Action

Shares of Intel were trading higher by more than 1.5 percent at $53.88 early Friday morning.

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Latest Ratings for INTC

Nov 2019MaintainsBuy
Oct 2019MaintainsMarket Perform
Oct 2019MaintainsUnderperform

View More Analyst Ratings for INTC
View the Latest Analyst Ratings

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