Editors' pick: Originally published April 14.
While questions surrounding near-term fundamentals of the stock are warranted, Intel still looks attractive over the longer term, wrote Pacific Crest Securities LLC analyst Michael McConnell wrote in Wednesday note.
"We remain constructive on the stock over the longer term given: (1) secular growth trends remain intact in [Data Center Group] (~50% of operating profits), specifically at cloud and networking customers, (2) optionality on future wireless losses, and (3) an attractive dividend yield of 3.2%)," he wrote. (Pacific Crest also has a price target of $35 per share.)
McConnell also noted that he expects that Intel to lower its full-year guidance.
The semiconductor company is likely to report a lackluster first-quarter earnings report mainly due to the PC market's softness, said Macquarie Capital (USA) Inc. analyst Deepon Nag via phone, adding that there's also concern around Intel's enterprise server business and mobile division. Intel reports earnings Tuesday, April 19.
In addition to such macro conditions, Intel is also going through management shakeup as evidenced by recently announced departure of its two key executives. Doug Davis from the Internet of Things group is retiring at the end of the year while the Client Computing group's Kirk Skaugen has left the company.
Shares of Intel fell 1.5% Thursday morning to $31.64, giving the Santa Clara, Calif.-based company a $149.23 billion market capitalization. The stock is down about 8% year-to-date.
Though the near-term sentiment is weak at this point, there's still huge upside in Intel's data center business and the overall operations of Intel should stabilize in 2016, Nag added. (Macquarie has a buy rating on the stock with a $35-per-share target price.)
Intel has five main segments: client computing; data center; IoT; software and services; and others.
RBC Capital analyst Amit Daryanani also wrote in a note last week that Intel may disappoint in Q1, adding that there will be even more of a downside bias toward the stock if the Q2 and calendar year 2016 expectations are reset lower.
He said downside to the stock could be around $26 per share while the upside -- if Intel maintains or beats the calendar year expectations -- would be in the range of $34 to $35 per share, he said.
The data center group has grown faster than the overall company's revenue and will continue to generate high growth rates, Daryanani argued, while acknowledging that Intel may face competition in this segment from a variety of semiconductor manufacturers. There are also potential issues about integrating its $16.7 billion acquisition of Altera Corp. in December.