Stifel Reaffirms Hold on Intel, $21 Price Target

Stifel analyst Ruben Roy reiterated a Hold rating and $21 price target on Intel (NASDAQ: INTC).

“Despite the Loss of Value from $16.7bn Paid in 2015, We Think The Deal is Positive for INTC: While the valuation garnered by Altera reflects a loss of value from its original acquisition price and is relatively low even when compared against that of its closest peer (LSCC sits at an 11.4x FY1 P/S multiple as of market close Friday), which is likely a function of differing growth and margin profiles, we are encouraged by this deal.

When Lip Bu Tan was announced as CEO of Intel a few months ago, our view was that he would prioritize the reshaping and restructuring of Intel’s operational portfolio and that he would leverage his vast multi-decade network of industry-leading talent in doing so.

In our view, this Altera deal is one of the first to validate that outlook.

We think FPGA, as an opportunity set within the greater semiconductor ecosystem, has legs to grow, but is non-core to INTC’s turnaround, so by maintaining a minority share, partnering with a key financial backer and bringing on best-in-class leadership, we think Altera is structurally better situated for improvement, which should benefit INTC over time via NCI on the income statement, alongside a strengthened balance sheet.

To the degree Altera is able to improve margins (49.9% adj-GM, 2.3% adj-OM in FY24) and sales growth (we had forecast a low-single digit decline in FY25), that would incrementally benefit INTC.

Moreover, it allows INTC to focus efforts on ramping improvements in its Products and Foundry segments, with the intent being for Altera to work closely as a partner by utilizing foundry services.”

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