Intel Is No Longer A Sell In These Analysts' Eyes

• Bernstein analysts led by Stacy A. Rasgon upgraded Intel Corporation INTC from Underperform to Market Perform.
• The firm boosted its price target from $25.00 to $29.00.
• Shares of Intel rose 0.24 percent on Wednesday.

According to the report issued Tuesday, “much has been made over the last quarter or two of Intel's above-seasonal back-half outlook for their PC client business, especially as PC datapoints have continued to deteriorate.” However, the firm’s updated channel analysis suggests there is potential for near-term upside to the company’s client business driven by channel fill in the second quarter of the year.

Bernstein’s analysis indicates that Intel has been getting rid of channel inventory in the first half of 2015, going against its usual pattern (which implies channel builds in the first half of the year, and channel drains in the second half), “in a market where PC vendors themselves are also flushing inventory, and suggesting the idea of a 2H fill on the back of Windows 10 and Skylake may not be entirely crazy.”

The report notes that, over the first quarter, Intel undershipped by roughly three million units (instead of overshipping the usual eight million units). This suggests a substantial amount of channel drain when compared to its normal activity.

The analysts assure that, while they still think back-half datacenter expectations are likely excessively aggressive, they are less convinced that the stock offers a compelling-enough near term short opportunity, as the PC market seems to be recovering.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.