Why This Analyst Sees 20% Upside at Intel

By Chris Lange Updated Jan 12, 10:10AM EST · Published Jul 13, 10:45AM EDT

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Why This Analyst Sees 20% Upside at Intel — © courtesy of Intel Corp.

Over the past year, there has been so much focus on Advanced Micro Devices Inc. (NASDAQ: AMD) and NVIDIA Corp. (NASDAQ: NVDA) that it is easy to just assume that all the growth will come at the expense of rival Intel Corp. (NASDAQ: INTC). Several analysts have grown cautious on Intel while increasing their views all year on AMD and NVIDIA. One firm is suggesting that perhaps Intel has sold off too much from its highs and that maybe it can still milk out plenty of growth.

Hilliard Lyons analyst Stephen Turner initiated coverage on Intel with a long-term Buy rating and a price target of $41, implying an upside of nearly 20% from the current price level.

Accordingly, the firm believes that Intel has an industry leading position in several mature markets due to its scale and Moore’s law manufacturing advantage. The firm anticipates new growth markets will expand Intel’s total addressable market (TAM) through the next five- to 10-year period, benefiting Intel shareholders.

Hilliard Lyons has a positive view of Intel’s strategy shift toward the data center, connecting end devices, including autos, and away from a PC-centric focus. The firm also has a positive view of Intel’s history of consistent dividend growth, share buybacks and synergistic M&A strategy.

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In terms of the outlook, Hilliard Lyons forecast second-quarter earnings per share (EPS) of $0.68 on revenue growth of 6% to $14.35 billion, versus a consensus estimate of $0.68 in EPS on revenue of $14.4 billion. The firm expects the company to record fiscal 2017 EPS of $2.84 on revenue of $60.78 billion, an increase of 2.3% from last year excluding the pending Mobileye acquisition. Hilliard Lyons expects a slight improvement to margins as higher average selling prices and restructuring efforts lead to improved operating results.

The firm detailed Intel’s financials as follows:

We have a constructive view of the company’s business model and strong balance sheet. About 80% of Intel’s revenue is from outside the U.S. and half of total revenue is derived from new growth businesses. We believe this signals an inflection point for Intel’s strategy and growth outlook. The company has also maintained strong free cash flow, currently yielding 4.6%, despite heavy capital expenditures.

Shares of Intel were last seen trading at $34.38 on Thursday, with a consensus analyst price target of $39.52 and a 52-week range of $33.23 to $38.45.

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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.