MKM Says Intel Offers 'Defensive Value'

The bull-bear debate centering around Intel Corporation INTC will continue with each side offering some compelling points, but MKM sees Intel as a stock that offers "defensive value" in a volatile environment and should be bought by investors.

The Analyst

MKM Partners' Ruben Roy maintains a Buy rating on Intel with an unchanged $58 price target.

The Thesis

Intel bears are quick to highlight the heightened competition across the data center group and tougher compares in 2019, Intel is expected to increase its total addressable market in data-centric end markets, Roy said in a note. The company's own management expects its TAM to be $300 billion by 2020, which it can address given a differentiated custom platform and system solutions.

Meanwhile, Roy said investors can look at Intel's board as another bullish indicator. The board's recent $15 billion increase to its authorized stock repurchase program signals its "commitment to shareholders." The existing authorization has $4.7 billion in authorized repurchases, which will likely continue along with acquisitions and strategic investments along with dividend payouts.

Looking forward to the end of the fiscal year 2018, Intel's management guided to a 31 percent year-over-year growth in earnings per share to $4.53. The analyst said this comes at a time when the stock is trading at 10 times forward earnings, which is a discount to its five-year median forward earnings average of 14 times and a discount to the peer group average multiple of 15 times. As such, Intel's stock offers investors a favorable risk to reward profile in the current volatile environment.

Price Action

Shares of Intel were trading down 1.4 percent to $48.16 Monday afternoon.

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