Shares of Intel Corporation INTC have "performed well" lately, and Raymond James said in a Monday note that the Silicon Valley company has zero negative catalysts on the horizon that would prompt Wall Street to revise estimates lower.
The Analyst
Raymond James' Chris Caso upgraded Intel from Underperform to Market Perform with no assigned price target.
The Thesis
Intel did a "good job" in providing its 2018 guidance, which implies an ongoing low-single digit decline in the PC business and high-single digit growth in the data center group, Caso said in the upgrade note.
The company will see "very strong growth" in memory, and even if the unit falls short of expectations, its low profit profile limits the "damage to earnings" and could even raise gross margins, the analyst said.
Intel is benefiting from an overall improvement in macro conditions, and the ramp of its "Purely" platform is shifting to its second year, Caso said.
"As such, we don't see [a] plausible catalyst to bring estimates lower in the near-term."
A shift toward a more bullish stance is not necessarily appropriate: Intel needs to prove the sustainability of its free cash flow in order for bulls to declare victory, the analyst said. This may be difficult to do, as Intel is transitioning away from the PC — which still represents approximately 50 percent of revenue — toward memory, IoT, and automotive businesses that come with a much lower margin profile.
Price Action
Shares of Intel were up 6.32 percent at the close Monday.
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