Intel’s results for the second half of the year could get a boost from PCs’ inventory replenishment, believes analyst Stacy Rasgon of Bernstein Research. Rasgon raised their rating on the chip maker to Market Perform from Underperform.
Draining channel inventory in first half
In July, Rasgon downgraded Intel from Market Perform to Underperform,citing risk to Intel’s server chip product sales or the firm’s DCG division. But on Tuesday, the analyst noted that a rebound in PC sales could help the chip maker. Rasgon says there have been a few concerns on Intel’s outlook for the year, considering “PC datapoint have continued to deteriorate.”
“Much has been made of Intel’s above-seasonal second-half implied guidance, in the wake of a PC market that seems less than robust,” the analyst said. But Rasgon notes that the chip maker has cleared much of the PC chip inventory this year and is in the process of building inventory for the remaining of the year.
Based on his analysis, Rasgon says Intel has been able to drain “channel inventory” for the first six months of 2015, and this is in “stark contrast” to the historical trend in which the first half of the year marks channel builds, followed by channel drains in the second. And such behavior from Intel suggests that the “idea of a 2H fill” based on the Windows 10 and Skylake is not “entirely crazy.”
Intel stock not compelling enough
Rasgon is still concerned about the future of the company’s data center products. “While we still believe back-half datacenter expectations are probably too aggressive,” there are good reasons to believe the stock does not present a “compelling-enough near term short” in a scenario that appears positive for the PCs.
Many other analysts have also released their verdicts on Intel in recent times. In a research note on Aug. 21, Citigroup reaffirmed its Neutral rating on Intel with a price target of $32. Deutsche Bank, in a note on Aug, 30, reiterated a Buy rating on the chip maker with a price target of $37. Presently, Intel has an average rating of Hold and a consensus price target of $35.06.
In the past 52 weeks, Intel shares have lost over 16% of their value. The stock hit its one-year high of $37.90 on Dec. 5, 2014 and its one-year low of $24.87 on Aug. 24. On Tuesday, Intel shares closed down 1.68% at $28.67.
