While Intel's EPS Goes Up, Its Multiple Doesn't

Intel Corporation INTC reported its C2Q revenue in line with and EPS above the consensus, while reiterating its CY16 implied EPS guidance at $2.50, above the consensus but in line with the estimate.

Credit Suisse’s John W. Pitzer maintains an Outperform rating on the company, with a price target of $40.

C2Q Results

Pitzer mentioned, however, that the C2Q EPS beat was once again of lower quality, while the DCG business delivered 4.5 percent year-on-year growth, failing to re-accelerate for the third consecutive quarter.

The analyst also noted that the restructuring messaging was “a bit confusing — one quarter after committing to $1.4 billion in annualized savings, INTC raised CY16 OpEx by $100 million.”

Related Link: Intel Has 10% Upside Following Q2 Earnings, According To Brean

Although the losses at NSG increased from $95 million to $224 million quarter-on-quarter, Pitzer stated that the positive during C2Q outweighed the disappointments.

C3Q Guidance

Intel guided to C3Q at the high end of seasonality, and Pitzer believes DCG growth has seen a trough and would reaccelerate to over 15 percent in 2H.

In addition, PC demand appears to be stabilizing, although the analyst believes the TAM expansion story is still not well understood.

Pitzer also pointed out there would be multiple product drivers in CY17, including XPoint, Purely, RSD and Silicon Photonics.

The CY16 and CY17 EPS estimates have been raised from $2.40 to $2.50 and from $2.70 to $2.75, respectively.

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