Morgan Stanley Still Sees Limited Growth Potential For Intel

Intel Corporation INTC reported its June quarter results in-line with expectations, reflecting a continued slowdown in key growth businesses, Morgan Stanley’s Joseph Moore said in a report. He maintained an Underweight rating on the company, with a price target of $31.

Management expressed optimism regarding a cloud rebound in the back half of the year. Analyst Joseph Moore mentioned, however, that Intel had limited growth potential.

Weak Performance By Growth Businesses

Data Center recorded growth of 5 percent, while Internet of Things registered 2 percent growth. NAND was down 20 percent y/y.

“While we expect seasonal strength in PCs, some 2h rebound in cloud spending, and a minority share of Apple baseband, we would temper that enthusiasm by noting that days of inventory (DOI) are at the second highest level in 10 years, and receivable DSOs are at an all time high,” Moore wrote.

The in-line results would have a negative impact on the stock, given the “multiple recent upgrades and calls for upside from the sell side,” the analyst commented, while adding that Intel is likely to deliver minimal organic growth in 2016.

The EPS estimate for FY16 has been raised by $0.01 to $2.38, while that for FY17 has been reduced by $0.03 to $2.38.

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