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Summary

  • Since the start of the year, analysts have turned overwhelmingly positive on Intel.
  • Of the last 19 new analyst reports, there has only been one downgrade. The rest are all positive or neutral.
  • The average expectation is for a share price increase of at least 10%.

Intel's (NASDAQ:INTC) shares are down almost 7.5% since reporting earnings in mid January. And considering that those earnings were well below analysts' estimates, that's actually not so bad. Since bottoming out at about $23.50 on February 5th, shares have actually advanced by about a dollar, sitting currently at $24.60.

As I have written several times before, a simple look over Intel's historical share price graph will clearly show that investors are deeply displeased with Intel's performance. Despite the fact that most analysts consider Intel's valuation to be relatively low, the lack of a clear growth strategy in the face of stiff competition and a shrinking core market have made investors reluctant to bid up the shares. For most investors, the only real reason to own Intel stock is for the juicy dividends and the share buyback program which serve to put a price floor under the stock. But in a world where the S&P index has returned over 150% in the last 5 years, those dividends and buybacks are hardly a consolation.

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As for the future of Intel, I will let more tech savvy minds deliberate. The single bright spot in the company's last earnings release was the anticipation that there are "signs of stabilization" in the PC market. Even that was met by skepticism among analysts. Most surmised that the flat lining in the industry was simply masked by a temporary uptick in sales as consumers and businesses upgraded their systems in advance of the Windows XP expiration deadline.

It seems like Intel can not seem to get a break anywhere. Not only have shareholders given up on its growth prospects, but analysts second guess any good news coming from the company, while continuing to overestimate future earnings.

In 2013, Intel was a company in transition. Led by new CEO, Brian Krzanich, there was hope for the company within the investment community, but trepidation as well. In terms of a stock price direction, analysts were clearly confused. The upgrades and downgrades on the stock price seemed to be rather arbitrary and price targets were all over the map.

Current Analyst Predictions

Going into 2014, it would be good to see how analysts rate the stock and what kind of forward price estimates they expect. The following chart summarizes the latest analyst opinions on Intel. To read the report issued by each analyst, simply click on the analyst's firm link.

Date

Firm

Action

Rating

Old Target

New Price Target

2/24/2014

TheStreet

Reiterated Rating

Buy

2/20/2014

Zacks

Reiterated Rating

Neutral

$26.00

$26.00

1/27/2014

Ned Davis

Upgrade

Buy

1/27/2014

TheStreet

Reiterated Rating

Buy

1/22/2014

Drexel Hamilton

Downgrade

Hold

$30.00

$26.00

1/17/2014

Deutsche Bank

Reiterated Rating

Buy

$28.00

$28.00

1/17/2014

Zacks

Reiterated Rating

Neutral

$28.00

$28.00

1/17/2014

MKM Partners

Boost Price Target

Neutral

$25.00

$26.00

1/17/2014

Evercore Partners

Reiterated Rating

Underweight

$20.00

$20.00

1/17/2014

Goldman Sachs

Reiterated Rating

Sell

1/17/2014

JPMorgan Chase

Boost Price Target

$29.00

$30.00

1/17/2014

Citigroup Inc.

Boost Price Target

$28.00

$29.00

1/17/2014

Canaccord Genuity

Boost Price Target

Hold

$22.00

$24.00

1/15/2014

Citigroup Inc.

Upgrade

Outperform

1/15/2014

BMO Capital

Upgrade

Outperform

$10.00

$31.00

1/14/2014

Jefferies Group

Reiterated Rating

Buy

$32.00

1/14/2014

JPMorgan Chase

Upgrade

Overweight

$20.00

$29.00

1/2/2014

Sterne Agee

Reiterated Rating

Neutral

$20.00

$25.95

1/2/2014

Wells Fargo & Co.

Reiterated Rating

Top Pick

Average

-

-

-

-

$27.30

In total there have been 15 new analyst notes out since the start of the year. Of these, there have been 7 price target increases and a total of 4 ratings upgrades. There has only been one stock downgrade, from the firm Drexel Hamilton, and despite the downgrade, that firm still has a price target of $26 per share on Intel's stock (higher than current value). To be sure, analysts' opinions should always be considered with a grain of salt, however, the resounding positive sentiment surrounding Intel's stock is in stark contrast to the bearish confusion which analysts displayed last year. In my opinion, the great change in sentiment in the analyst community is a positive signal for Intel's stock performance in 2014.

Changing Sentiment

The rush of upgrade for Intel can be attributed to two main factors. The first is the stabilization in the PC industry. While it can be argued that the strong numbers recently being posted are simply positive data blips, in an otherwise downward trend, most analysts seem to think that PC shipments have turned a corner and are set for an upward gain for at least the remainder of 2014. JP Morgan analyst Christopher Danely recently placed a $30 price target on Intel, up from a lowly $20 in 2013. He noted strong results from some of the leading PC makers in their recent earnings reports, with "HP (NYSE:HPQ), Microsoft (NASDAQ:MSFT), Lenovo (OTCPK:LNVGF) and Asus all beating consensus estimates on their PC businesses for the first time in years."

It's important to note that not all analysts are so bullish. Timothy Arcuri from Cowen and Co. noted that while the PC industry is stabilizing, Intel's stock was starting to get a bit ahead of itself. He stated, "feels over-hyped near term." To be sure, Intel's shares did rise almost 30% in 2013, however they have fallen about 5% so far in 2014.

The other main factor driving analyst upgrades is Intel's relatively cheap valuation, relative to other semiconductor stocks as well as the general market. Citigroup recently issued an upgrade due to this "valuation call." Perhaps the best way to sum up the current sentiment is to say that analysts are "cautiously optimistic." Well, considering that Intel has seen its stock price stagnate for the last decade, that might be news enough to excite investors.

Conclusion

Since the beginning of 2014, the average analyst price target for Intel is $27.30. That represents an expected increase of over 10% above Intel's current share price. Coupled with the company's safe and relatively high dividend, and the consistently strong share buyback program, it would seem that many in the investment community believe that Intel will be a strong performer in 2014. After years of neglect and underperformance, Intel might finally be ready to once again resume growth and be a rewarding addition to portfolios.

Source: Intel - Skeptics Beware, Analysts See Upside