Why Canaccord Genuity Sees Intel Rising Over 30% Despite Sell-Off

By Chris Lange Published Oct 2, 10:35AM EDT

Follow 24/7 Wall St. on Google

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

Despite the market sell-off, Intel Corp. (NASDAQ: INTC) shares have proven fairly resilient, strengthened by its dividend and long-term data center growth strategy. As a result, one key analyst has just issued perhaps one of the most bullish calls on the stock.

Canaccord Genuity reiterated a Buy rating with a $39 price target, implying upside of 31% from current prices. It is also worth noting that this price target is just $1 off Wall Street’s highest analyst price target.

The firm remains confident in its long-term thesis, centered on margin accretive Data Center Group (DCG) growth, a sharp cut in Mobile losses in 2016, solid Internet of Things growth and prudent management of the secular personal computer (PC) market decline. Near term, while Canaccord Genuity still believes modest downside risk remains to second half guidance in both the DCG and Client Computing Group, the firm believes investors are well aware of these risks and near-term data points from each business have trended more positive ,with solid cloud spending trends and the G.A. release of Skylake.

Overall, Canaccord Genuity maintained its bullish view on improving Intel fundamentals highlighted by an increasing mix of revenue and profit driven outside of the PC market. While Mobile losses remain heavy, the firm believes the shift to Cherry Trail and SoFIA products should quickly reduce the need for costly subsidies and dovetail nicely with cost synergy savings from combining the Mobile/PC businesses.

ALSO READ: 3 Top Stocks to Buy for Flash Arrays Taking Over Storage

In its report, the firm gave its long-term thesis on Intel:

As Intel’s sales and profit mix gradually shifts toward DCG, we grow increasingly confident in our bullish long-term thesis. In addition, we believe this mix shift toward DCG will lessen exposure to consumer pricing pressures as sophisticated cloud/networking customers have shown willingness to buy up the Xeon stack, therefore absorbing increasing input costs as Moore’s Law continues to asymptote.

While the most recent supply chain conversations indicate an improving picture with the launch of Skylake and Win10, Canaccord Genuity maintains its estimate for Intel’s PC revenue to decline 11% year over year in 2015, or below management’s guidance for a high-single-digit decline. That said, the firm believes investors are already anticipating a shortfall of this magnitude, and it anticipates roughly flat year over year PC revenue in 2016, versus easy comparables with improved operating profit.

Shares of Intel were down 0.9% at $29.73 Friday morning. The stock has a consensus analyst price target of $33.65 and a 52-week trading range of $24.87 to $37.90.

ALSO READ: Groundbreaking Technological Innovation Could Be Huge for 5 Top Tech Stocks

About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.