Intel shares were up yesterday despite a negative report from Citigroup claiming that the chip maker overpaid for Altera. On Monday, the chip maker completed its $16.7 billion Altera acquisition. Citigroup has a Neutral rating on the stock with a price target of $34.Intel Up Despite Citigroup Claiming Altera Deal Is Expensive

Altera a good fit, but Intel overpaid

Questioning the value of the deal, Citigroup noted that the price paid is too high considering the limited profit growth.

“While we like the FPGA [field-programmable gate array] business, with 5% growth and operating margins in the 20’s and 30’s, we believe Intel massively overpaid at 24X peak EPS of $2.25 or 33X EBITDA,” the firm said, according to Barron’s.

Citigroup also expressed concerns about the areas in which the chip maker needs some improvement. The firm’s analysts want to see a stable improvement in the PC business or the chip maker resorting to aggressive cost-cutting in its loss-making mobile segment “for us to consider becoming more constructive on the stock,” the firm said.

Deutsche Bank analyst Ross Seymore also considers Altera a “good strategic fit” for Intel. Intel’s CPU technology, combined with Altera’s expertise in field-programmable gate array, will lead to remarkable cost synergies. This seems very possible as both technologies are not separate but complement each other and are somewhat dependent on each other.

The analyst expects Altera to contribute $1.76 billion to the chip maker’s DCG revenue next year, accounting for 9% of its expected DCG revenue for 2016. However, initially there will be little improvement in Altera’s gross margin, and its overall operating expenditure will rise by 2.7%.

Consensus rating of Hold

Many analysts have released their verdicts on Intel in recent months. In a report on Oct. 21, Barclays analysts reissued their Buy rating on the chip maker with a price target of $38. In a report on Oct. 15, Oppenheimer analysts reaffirmed their Hold rating on the stock.

Analysts at Deutsche Bank reaffirmed their Buy rating on the stock with a price target of $37 in a report on Sept. 20. Wells Fargo analysts, in a report on Sept. 16, reissued their Buy rating on the chip maker. Presently, Intel has an average rating of Hold and an average price target of $36.25.

On Tuesday, Intel shares closed up 1.46% at $35.44. Year to date, the stock is down by over 2%, while in the last one month, it is up by almost 3%.