Intel: BMO Says Buy, x86 Can Still Challenge RISC

Intel: BMO Says Buy,

x86 Can Still Challenge RISC


BMO Capital analyst Ambrish Srivastava today raised his rating on Intel (INTC) to Outperform from Market Perform, writing “Going out of business it is not.” paraphrasing Yoda. He assigned a $27 price target.

Srivastava writes that Intel sports a multiple of 5 times enterprise value versus Ebitda, a multiple seen during the depths of the recession but otherwise lower than the stock’s seen in the last decade.

Yet Intel’s normalized earnings are running higher than in past, it has a dividend yield approaching 3.5%, and the next version of its “Atom” chip in a lower-power version for tablets could be a catalyst, in his view.

“The rise of the tablets has been the main issue that has contributed to the stock’s underperformance,” writes Srivastava, and that’s a real concern, as tablets will cannibalize PC sales by 33%, by his estimate, and the “deck is stacked against Intel.”

Nevertheless, Intel’s x86 chips have a fighting chance against ARM Holdings (ARMH) -based chips, like those from Nvidia (NVDA).

The important point, in Srivastava’s view, is that power efficiency, for which ARM’s designs have an edge in mobile computing, can be achieved in several ways: through the chip architecture, microarchitecture, or through manufacturing prowess.

“The main takeaway here is that given time and effort, the Intel architecture should be able to catch up with the ARM architecture,” writes Srivastava. “The same can be said for the ARM architecture on the higher end, i.e., given time and effort, and with the right ecosystem, the ARM architecture should also get close to the Intel architecture, on at least the low end server side.”

Intel shares today are up 24 cents, or 1%, at $21.78.



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