Intel Corp’s strong fundamentals backed by sustained foundry benefits and robust momentum supporting growth potential earned it a Buy rating from Canaccord Genuity analyst Matthew Ramsay and Steven Lee, who also put a $39 price target on the chip maker. The analysts had meetings with a number of Intel executives related to the PC, wireless, memory and IoT businesses at Computex in Taipei.
Intel will eventually suspend subsidies
Canaccord Genuity reiterated their bullish stance on the company despite a lack of optimism for the PC segment. Although Intel is incurring heavy mobile losses, the analysts firmly believe that the chip maker will quickly catch up with the rivals, and thereafter there will be no need of subsidies.
Furthermore, the research firm notes that Intel stock represents the logical views of investors over the challenges facing the PC business. The analysts believe that the robust performance of other divisions such as DCG will help Intel to hit its overall flat revenue guidance for the year. Despite being bullish on the chip maker, Canaccord lowered its FY15 GAAP EPS estimates by $0.02 to $2.16. However, for 2016, EPS estimates have been reiterated at $2.61.
Canaccord analysts bullish on Intel
Backed by the launch of Intel’s new Skylake processor and the much-awaited Windows 10, the firm expects an above average second half fiscal year for the chip maker. However, the research firm expects 2015 PC revenue to decline by 9%, much lower than Intel’s mid-single digit decline guidance. On the other hand, the research firm believes that the cost synergy opportunities from integrating the PC and Mobile divisions is underestimated, and the management is yet to recognize this opportunity.
“We continue to anticipate a sharp snap back of PC sales in second half as the channel replenishes with Windows 10 systems; however, we believe Intel’s guidance sets an unrealistically high bar given the soft first half,” Ramsay and Lee noted.
Separately, referring to the meetings in Taiwan, the analysts suggested that more users are showing interest in ARM processors, for whom both the enterprise networking and server markets presents a potential long-term royalty growth opportunity. Ramsay and Lee believe that enterprise networking applications could earn ARM royalties of over $200 million by 2020. Canaccord Genuity reiterated its Buy rating on ARM with a price target of $63.
