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Intel Corporation (INTC): Analysts Weigh In With Differing Views Following Earnings

By Christine Brown

Yesterday, Intel Corporation (NASDAQ:INTC) announced its earnings results for Q315. The company reported quarterly revenues of $14.565 billion, an increase of 10% over the previous quarter, though just shy of consensus estimates of $14.22 billion. EPS was $0.64, coming in ahead of estimates of $0.58. The Q3 results got a boost thanks to the better-than-expected performance of Client Computing Group, the company’s primary operating group. Analysts were eager to weigh in following the earnings report. Here, we focus on analysts who perceived the earning differently.

Chris Caso from Susquehanna maintained a Neutral rating for the stock with a price target of $30 as he waits for a better entry point. Caso said, “INTC posted results that were ahead of expectations for 3Q, and essentially in line with expectations for 4Q. Data center came in a little weaker than expectations due to weakness in enterprise, and was offset by strength in PC component ASPs.”

Talking about the positives, he commented, “We think the company’s position in data center remains secure (albeit with persistent macro concerns), and we expect a further reduction in mobile operating losses next year.” He also mentioned the impact of the company’s Skylake processors and the new Windows, noting, “Looking forward, we do think the PC market is likely to experience a tailwind in 2016 as Skylake and Windows 10 begin to impact the market.”

Caso concluded by saying, “Despite these factors, however, we find it difficult to get INTC earnings past $2.50 even under a highly favorable scenario, and we think that level of earnings power caps the stock in the mid-30s. We had been hoping for a better entry point and a more favorable stock setup for 2016. But we still haven’t gotten our wish, and we therefore remain on the sidelines.”

Since Chris Caso has only provided neutral ratings on the company, he does not have a success rate or an average return on the stock.

Separately, Doug Freedman from Sterne Agee CRT maintained a Buy rating for the stock with a price target of $38. Freedman noted, “INTC posted solid Q3 results with Q4 midpoint guidance $0.02 above street. Client Computing Group (CCG) upside came from Skylake launch that lifted ASPs; CCG also benefited from lower mobility losses. Data Center Group (DCG) Y/Y growth outlook was lowered to 10-12% from 15% prior due to macro headwinds but still above market longer term consensus of 10% y/y.”

Freedman is bullish on Intel because his thesis “regarding double-digit DCG growth driving higher profitability and FCF remains intact as we see secular demand trends driven by cloud data center market share gains.”

Doug Freedman has rated Intel 28 times since 2009, earning an 85% success rate recommending the company with a +9.5% average return per INTC rating when measured over a one-year horizon and no benchmark.

According to the 28 analysts polled by TipRanks in the last 3 months, most of them share Freedman’s bullish sentiments ad 16 of them are bullish, 2 are bearish, and 10 are staying on the sidelines. The average 12-month price target for Intel is $35.26, marking a 7.5% potential upside from current levels.