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Nomura Downgrades Intel Following CEO Departure

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Nomura Downgrades Intel Following CEO Departure
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Intel Corporation (NASDAQ: INTC) abruptly and unexpectedly saw CEO Brian Krzanich depart last week, and one Wall Street analyst says there's now simply too much uncertainty surrounding Intel for investors to buy the stock.

The Analyst

Nomura analyst Romit Shah downgraded Intel's stock from Buy to Neutral and lowered his price target from $60 to $55.

The Thesis

Intel is losing server share to Advanced Micro Devices, Inc. (NASDAQ: AMD), Shah said in a note, and Intel's stock has simply run out of upside after gaining more than 50 percent in the past year.

“INTC’s multiple started compressing before Mr. Krzanich’s departure; lack of clear leadership will likely only add to the already growing uncertainty about Intel’s long-term outlook,” Shah said in the downgrade note.

In terms of Krzanich’s replacement, Shah said Intel’s product group head Murthy Renduchintala is the most likely candidate. However, Shah said outside hires such as Broadcom Inc (NASDAQ: AVGO)’s Hock Tan or GlobalFoundries’ Sanjay Jha might be better qualified for the position.

Looking ahead, Shah still sees impressive growth numbers from Intel in the next several years. Shah has raised his 2018 and 2019 EPS estimates from $3.85 and $4.33 to $4.16 and $4.40, respectively.

Shah’s $55 price target represents a 12.5 times multiple on that 2019 EPS estimate, in the middle of the stock’s historical earnings multiple range. The stock will likely continue to see downside valuation protection in the 11 times multiple range.

Price Action

Intel traded lower by more than 2 percent Monday morning following the downgrade.

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Latest Ratings for INTC

DateFirmActionFromTo
Oct 2018BMO CapitalMaintainsOutperformOutperform
Oct 2018NomuraMaintainsBuyBuy
Oct 2018NomuraUpgradesNeutralBuy

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