Pat Gelsinger, the CEO of VMware, is taking over from Bob Swan at Intel.
David Ramos/Getty ImagesInvestors should take note when a group of financial analysts—who often obsess over arcane matters such as changes of hundredths of a percentage point in gross margins—make alterations to their stock estimates after a change in leadership.
That’s what has happened Thursday, after Intel said CEO Bob Swan would be succeeded by VMware CEO Pat Gelsinger, an Intel alumnus, on Feb. 15. Analysts like the switch.
Intel (ticker: INTC) stock closed up 4% at $59.25 after notching a 7% advance Wednesday.
BMO Capital Markets analyst Ambrish Srivastava raised his target for the stock price to $70 from $50 early Thursday. His reasoning revolves around Gelsinger’s experience at Intel, where he worked for 30 years, and at VMware, which he has run since 2012.
“While we do not expect any near-term big changes, the richness of experience that Pat Gelsinger brings from his prior tenure at Intel as well as his experience running VMware, we believe he is the right person who can address the daunting, but not insurmountable challenges that Intel faces,” Srivastava wrote.
The analyst added that because of the number of disappointments Intel has encountered, even a few baby steps in the right direction should propel shares upward. He also pointed to the success of an Intel rival, Advanced Micro Devices (AMD), under the leadership of Lisa Su, who Barron’s has listed as one of the world’’s best CEOs.
Atlantic Equities too raised its target price on Intel shares, lifting it to $55 from $36. Atlantic analyst Ianjit Bhatti upgraded the stock to the equivalent of a Hold, arguing that the company expects to top its own guidance for the fourth quarter. He said Gelsginer is a proven CEO given his time at VMware—he reportedly faked tattooing the name of the company on his arm when he took that job—and has a deep understanding of Intel, and the chip business.
“We upgrade to Neutral given the calibre of Intel’s new CEO, the possibility of more radical strategic changes and our expectation that the market will be willing to look through any near-term negative news flow while a new strategy is formulated and implemented,” Bhatti wrote.
Morgan Stanley raised its target price to $70 from $60, and upgraded the stock to the equivalent of a Buy. Analyst Joseph Moore cautioned investors in a Thursday note that there were no easy fixes to the company’s struggles, but said that with the help of new leadership, the risks may moderate over time.
Chief investment strategist Eric Ross at Cascend Securities wasn’t as quick to join the cheering. In a Thursday note, he wrote, “Intel stock should not be up on Bob Swan’s departure—this is just admitting the issue.”
Ross says that Swan was only a part of the company’s weakness, and that the underlying problem is its engineering challenges. Those could take more than three years to fix—and even that is an optimistic assessment, he says. As Intel has struggled, Taiwan Semiconductor Manufacturing (TSM) has leapt ahead of it in fabrication technology, a setback Intel may never recover from, he says.
Shares of Intel have returned about 2% in the past year, as the PHLX Semiconductor index has advanced more than 50%.
Write to Max A. Cherney at max.cherney@barrons.com
https://ift.tt/2XExubu
Business
Bagikan Berita Ini
0 Response to "Intel Stock Is Rising Again as Wall Street Praises Change in CEOs - Barron's"
Post a Comment