Intel's 'Blowout' Q1 Turns KeyBanc Incrementally Bullish

Intel Corporation INTC reported first-quarter results Thursday afternoon that KeyBanc Capital Markets described as a "blowout."  

The Analyst

KeyBanc's Michael McConnell maintains an Overweight rating on Intel's stock with a price target lifted from $60 to $65.

The Thesis

Intel's Q1 was highlighted by a notable revenue and EPS beat of $16.1 billion and 87 cents per share versus McConnell's estimates of $15 billion and 70 cents per share, the analyst said in a research report. Beyond the headline numbers, the company showed "impressive" performance in the data center business, where revenue grew 24 percent from one year ago.

Intel's second-quarter revenue guidance of $16.3 billion implies data center growth will continue in the near-term, McConnell said. 

Intel also lifted its 2018 revenue guidance from $65 billion to $67.5 billion, while its EPS guidance was lifted from $3.55 to $3.85, the analyst said. Due to higher sales, the company's operating expenses in 2018 should be 30 percent of sales, which would be a full year ahead of the company's plan, he said. 

The bullish case for Intel remains unchanged after Thursday's print and is based on the following, McConnell said:

• Data center revenue growth re-accelerating in 2018.
• Conservative guidance in the client computing and data center segments "de-risks" 2018 expectations.
• Growth opportunities in networking, memory and Internet of Things.
• An attractive dividend yield of 2.3 percent.

Price Action

Intel shares were traing up 6.7 percent to $56.61 in premarket trading Friday. 

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