Morgan Stanley Turns Bullish On Intel, Cites CEO Changeover

After a rocky 2018, Intel Corporation INTC is off to a hot start this year — and one major Wall Street firm gave the stock a vote of confidence Friday.

The Analyst

Morgan Stanley analyst Joseph Moore has upgraded Intel from Equal-Weight to Overweight and raised the price target from $55 to $64.

The Thesis

Intel’s CEO transition could serve as a positive catalyst for the stock and offers an opportunity for a change in direction of the business, Moore said in the Friday upgrade note.

While some Intel enthusiasts are hoping for a technology-minded CEO, Moore said a leader who is more versed in the business side of the job might be just what Intel needs.

The process technology issues that have plagued Intel in recent quarters are a perfect example of pushing too hard to meet technology milestones, the analyst said.

“With a better portfolio optimization process, framing those technology issues around business risk-reward,a mindset of optimizing free cash flow more than earnings and a higher standard of M&A accretion, we see the multiple expanding from 12x to 14x in our base case."

Intel could easily choose to follow in the footsteps of Broadcom Inc AVGO and “aggressively streamline” its business by selling off underperforming business segments, Moore said.

While Intel investors wait for a new CEO, the analyst said there’s no clear reason why Intel — a company that generated $60 billion in revenue, has 65-percent gross margins and holds a dominant share of its market — should trade at one of the lowest earnings multiples among its peer group.