Intel Stock Rises Again As Wall Street Praises CEO Change

Text size

Investors should take note when a group of financial analysts – who are often obsessed with obscure issues such as hundredths of a percentage point changes in gross margins – change their market estimates after a change in leadership.

That’s what happened on Thursday, after Intel said CEO Bob Swan would be replaced by VMware CEO Pat Gelsinger, a

Intel

alumnus, February 15. Analysts love change.

Intel stock (ticker: INTC) closed up 4% at $ 59.25 after posting a 7% advance on Wednesday.

BMO Capital Markets analyst Ambrish Srivastava raised his share price target 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 led since 2012.

“While we don’t expect big changes in the short term, the wealth of experience Pat Gelsinger brings from his former tenure at Intel as well as his experience managing VMware, we believe he is the right person who can meet the challenges, but not the overwhelming challenges that Intel faces, ”Srivastava wrote.

The analyst added that due to the number of disappointments Intel has faced, even a few small steps in the right direction should propel stocks higher. He also highlighted the success of an Intel rival,

Advanced Micro Peripherals (AMD),

edited by Lisa Su, who Barron’s is one of the best CEOs in the world.

Atlantic Equities also increased its target price on Intel shares from $ 36 to $ 55. Atlantic analyst Ianjit Bhatti raised the stock to the equivalent of a Hold’em, arguing that the company expects to beat its own guidance for the fourth quarter. He said Gelsginer is a proven CEO given his time at VMware – he allegedly faked the company name tattoo on his arm when he accepted the position – and that he has a deep understanding of Intel and of the chip industry.

“We are moving to Neutral given the caliber of Intel’s new CEO, the possibility of more radical strategic changes, and our expectation that the market will be ready to consider any negative news flow in the short term while a new strategy is formulated and implemented, ”Bhatti wrote.

Morgan Stanley increased its target price to $ 70 from $ 60, and improved the stock to the equivalent of a buy. Analyst Joseph Moore warned investors in a Thursday memo that there were no easy solutions to the company’s difficulties, but said that with the help of new leadership, the risks could subside over time.

Chief investment strategist Eric Ross at Cascend Securities was not so quick to join in the applause. In a Thursday memo, he wrote: “Intel shares shouldn’t be up after Bob Swan leaves – it’s just about admitting the problem.”

Ross says Swan was only part of the company’s weakness and the underlying problem lies in its engineering challenges. It could take more than three years to fix – and even that is an optimistic assessment, he says. As Intel struggled,

Semiconductor manufacturing in Taiwan

(TSM) has got a head start on manufacturing technology, a setback Intel may never recover from, he says.

Intel shares have returned around 2% in the past year, with the PHLX Semiconductor index rising more than 50%.

Write to Max A. Cherney at [email protected]