The Intel Corp. announced a strong boomout in the March quarter, fueled by strong growth in the data-centric businesses, but questions remain regarding the sustainability of corporate results and problems with the production of 10-nanometer chips.
"We believe the consensus was expected to deliver strong results, but these were really impressive," wrote SunTrust Robinson Humphrey analyst William Stein. Intel significantly exceeded its earnings and earnings expectations on Thursday afternoon and reported 25% growth for its data-centric business, with the exception of McAfee. Data revenue accounted for almost half of Intel's revenue
total revenue for the quarter, a company record. Shares rise 0.3% on Friday after giving up most of their previous gains.
Stein raised his price target from $ 50 to $ 57 after the results, but he stayed on the sideline. "Sustainability of strength and appreciation keeps us firm," Stein wrote.
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Meanwhile, Thursday's results were enough to make amber analyst Stacy Rasgon bear his bearish stance on Intel's stock give up. "Reversing the spending outlook made the short case a challenge," Rasgon wrote. "The recent unexpected [data-center group] turn has made it painful."
Rasgon took a somewhat more optimistic view of the future growth of the company. He saw the Intel outlook as a forecast for the double-digit growth of the Datacenter group in the second half of the year and for the full year by 15% to 20%. "Given that CFO Bob Swan does not like to release numbers he can not match, we suspect that 2H visibility is better than they allow," he wrote. Rasgon increased its performance on Friday from Underperform and raised its price target from $ 38 to $ 54.
The data-centric businesses are seen as critical in the face of fiercer competition for Intel's legacy businesses.
Another key concern of investors remains the discussion of the challenges associated with the production ramp for the 10 nanometer chip, which is expected to result in improvements in performance and efficiency. "The rate of improvement is slower than we expected," said Brian Krzanich, chief executive officer, on the company's earnings. Accordingly, Krzanich said that "volume production" will take place in 2019 rather than the second half of 2018.
This announcement "clearly shows that the benefits of Moore's Law are becoming increasingly difficult to achieve," says Stifel analyst Kevin Cassidy, writing Friday. He rates the stock on hold, but increases its price target from $ 53 to $ 57.
Problems with the 10-nanometer production also let the analysts of RBC Capital Markets Amit Daryanani pause. "Given the recent consecutive results and execution, we are becoming increasingly constructive about the stock," Daryanani wrote, rating the stock in sector performance and increasing its target from $ 54 to $ 58. "However, in [data-center group] to 2H: 18, we are looking for further testing for 10 nanometer yield improvement and better visibility."
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UBS analyst Timothy Arcuri, however, is not too worried: "The ongoing 10-nanometer manufacturing issues must definitely be resolved However, this is an old narrative (equipment companies have not seen changes in Intel's plan for many quarters, and Intel's switch to 7-nanometer (as soon as it's completely satisfied with [extreme ultraviolet lithography]) is a huge leap in scaling which will pay off future dividends especially for large, computationally expensive AI applications. "Arcuri has a buy rating for the stock and a target of $ 70.
Wall Street's sentiment towards Intel is quite positive, out of the 40 surveyed by FactSet Analysts covering the stock have 26 buy ratings, 12 have hold ratings, and two have sell ratings, with an average price target of $ 59.89, about 10% higher than the ak current level.
Intel shares have risen 43% in the last 12 months, while the S & P 500
SPX, + 0.06%
has gained 12% and the Dow Jones Industrial Average
of which Intel is a component, has grown 16%.