Intel Upgraded At Morgan Stanley On A Solid Quarter, Achievable Guidance

Intel Corporation INTC reported robust results for Q4, although the 2017 guidance was disappointing.

Morgan Stanley’s Joseph Moore upgraded the rating on the company from Underweight to Equal Weight, while raising the price target from $35 to $38.

Q4 Results

Intel reported its revenue for Q4 at $16.4 billion, beating the consensus and the estimate, driven by improved performance in client computing, which more than offset the slower than anticipated growth at the datacenter segment.

The non-GAAP EPS came in at $0.79, marginally ahead of consensus. Client computing grew 3 percent quarter on quarter and 4.3 percent year-on-year during Q4 to $9.1 billion.

2017 Guidance

The analyst believes, however, that Intel’s guidance is based on a more realistic outlook for the datacenter segment, following the 35 percent underperformance to semiconductor group over the last two years.

Although management is expected to drive growth back to 10 percent over time, the current guidance of high-single-digit growth for 2017 appears much more realistic.

Moore believes the PC guidance is also achievable, “some nice cushion from y/y average selling price increases early in the year following 2016's 6 percent increase.”

However, Intel’s 2017 revenue and operating income guidance was below the consensus forecasts but in line with the estimate, while the EPS guidance was in line with expectations, reflecting lower taxes and higher investment income.

Free cash flow is expected to decline due to an expected increase in capital spending.

At last check, shares of Intel were up 1.85 percent at $38.26.