Intel Corporation Stock Upgraded But Threats Still Loom

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Intel has been upgraded by Macquarie Research analysts from Neutral to Outperform. The research firm, which expects the chip maker’s stock to make a comeback this year, has raised its price target from $34 to $35.

PCs — a catalyst this year

In 2015, the chip maker under-shipped, and analysts believe this adds “potential upside to estimates as the PC supply chain replenishes processor inventories.” The analysts noted that along with the improving stock market, the stock offers an attractive dividend yield.

The upgrade from Macquarie follows the fourth-quarter fiscal 2015 financial results from the chip maker on Jan. 14. For the quarter, the chip maker reported earnings of 74 cents a share versus analysts expectations of 63 cents a share. Revenue for the quarter came in at $14.91 billion compared to the estimate of $14.8 billion.

Despite robust earnings, Intel’s stock dropped owing to concerns about slowing growth for the Data Center segment. On Monday, Intel stock closed down 1.09% at $29.60. Year to date, the stock is down by over 18%, while in the last year, it is down by almost 19%.

Looming threats for Intel

Last year did not go very well for the chip maker with falling revenues, slowing data center growth and weak guidance. The trend is expected to continue with “two new threats looming on the horizon,” says a report posted on Seeking Alpha by Scott Nursten. One of the visible threats is Qualcomm, which is expanding into the server chipset market, while the other, which is Apple, is “more of a potential threat, but is sourced from the same place as some of Intel’s current grief.”

Qualcomm recently entered into a joint venture with the People’s Government of Guizhou Province for making “world class server chipsets in China.” It’s a smart move from the company as Intel has recently been blocked by the U.S. government from selling server chips to China owing to national security interests.

There have been rumors of “ARM-based Macs on the back of their impressive performance gains. Anandtech recently did an iPad Pro review that might be sparking a few meeting requests internally at Intel,” the report says. Apple now holds 7.6% of the PC market, which equals 59% of Intel’s revenue. And if Apple moves away from the chip maker, it would lower Intel’s revenue by around 4.6%, the report says. Apple is one of just a few PC makers witnessing growth, so Intel would not like to lose such a vital client now.

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