Market Overview

Intel Is The Semiconductor Sector's Only Candidate For Estimate Raises, Nomura Says In Upgrade

Intel Is The Semiconductor Sector's Only Candidate For Estimate Raises, Nomura Says In Upgrade

The PHLX Semiconductor Sector (NASDAQ: SOX) is down about 2 percent year-to-date, underperforming the broader market. Notwithstanding the sector's lukewarm prospects, a Nomura Insitnet analyst found a bright spot in Intel Corporation (NASDAQ: INTC).

The Analyst

Analyst Romit Shah upgraded Intel from Neutral to Buy and maintained a $50 price target for the shares, suggesting roughly 14-percent upside from current levels.

The Thesis

Intel is likely to be the only semiconductor name in Nomura's coverage universe for which estimates are likely to be raised in October or November, Shah said in the Monday upgrade note. (See the analyst's track record here.) 

The chipmaker is likely to see at least seasonal revenue growth and stronger gross margins through the second quarter of 2019 as supplies remain constrained until the ramp of 10nm, the analyst said. 

The pressure on factories and tight supply of 14nm PC processors that were recently noted by Intel are likely due to several factors, including Specter Meltdown design flaws, the 10nm delay, Apple Inc. (NASDAQ: AAPL) exclusively sourcing the XMM7560 modem and a stronger PC market, Shah said. 

Nomura Instinet views Intel's intention to prioritize the production of Xeon and Core processors for the high-performance segments as positive for earnings and gross margin. The Street's 60-percent gross margin estimate for Q4 and the Q1 of 2019 is conservative, the analyst said.

Citing conversations with U.S. and foreign semi equipment vendors, the analyst said 10nm volumes are becoming "more meaningful."

"This should help alleviate fears about process technology leadership and share loss and drive Intel's multiple higher," Shah said. 

Nomura Instinet's EPS estimates of $4.16 and $4.25, respectively, for 2018 and 2019 are conservative, especially because its model does not assume growth for the data center group in 2019, the analyst said. 

The firm's price target assumes a multiple which is about 5 points below Intel's five-year average discount to the S&P 500.

The discount is warranted given "continued uncertainty around management (CEO search) and concerns over impending competition from Advanced Micro Devices, Inc. (NASDAQ: AMD) in server processors," Shah said. 

The Price Action

Intel shares have shed about 3 percent year-to-date.

The stock was up 1 percent at $44.44 at the time of publication Monday. 

Related Links:

Analysts: Micron's Buyout of Joint Flash Venture With Intel A Long-Term Positive

Barclays Downgrades Intel, Says Chipmaker Faces 'Costly Battle' With AMD For Market Share

Latest Ratings for INTC

Jan 2021DZ BankUpgradesSellHold
Jan 2021NeedhamUpgradesHoldBuy
Jan 2021Cowen & Co.UpgradesMarket PerformOutperform

View More Analyst Ratings for INTC
View the Latest Analyst Ratings


Related Articles (INTC)

View Comments and Join the Discussion!

Posted-In: Nomura Instinet Romit Shah semiconductorsAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga

Latest Ratings

MRTXHC Wainwright & Co.Maintains257.0
NVDATruist SecuritiesMaintains672.0
BLKBMO CapitalMaintains715.0
BLKDeutsche BankMaintains838.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at