Morgan Stanley Turns Bullish On Intel, Cites CEO Changeover

After a rocky 2018, Intel Corporation (NASDAQ: 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 (NASDAQ: 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.

Price Action

Intel shares were trading up 2.59 percent at $52.74 at the time of publication Friday following the upgrade. 

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