Goldman Sachs Comments on Intel's (INTC) Improved Q2 Guidance

Goldman Sachs maintained a Sell rating on Intel (NASDAQ: INTC) with a modified price target of $18.00 (from $17.00). Yesterday shares gained after Intel raised Q2 guidance. Analyst James Covello thinks strong execution is priced in.

"We had not expected Intel to positively preannounce, and we believe the announcement illustrates improved execution under the new management team. We believe stronger enterprise PC demand is due to ongoing upgrades in 2Q14 post the end of Windows XP support in April. However, we had been surprised when Intel did not report upside to EPS earlier this year, as others in the PC supply chain experienced a pick-up in PC demand. As a result, Intel’s higher 2Q likely reflects part of the strength that peers saw in 4Q13 and 1Q14," said Covello.

"We highlight that 1) the corporate refresh cycle in 1H14 will likely be a headwind to PC sales in 2H14 and 2015; 2) short interest is at a 1-year low, suggesting that the market has already anticipated stronger near-term fundamentals; 3) INTC’s premium EV/FCF valuation (19X vs. the group at 17X) suggests that Intel’s improved execution is already priced in. We remain Sell as capex is elevated, FCF is flat to down yoy, and we believe the company faces structural challenges," he added.

For an analyst ratings summary and ratings history on Intel click here. For more ratings news on Intel click here.

Shares of Intel closed at $27.96 yesterday.

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