Which Projects Is Intel (INTC) Ramping Spending On And Why? - Nomura

October 24, 2016 9:19 AM EDT
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Nomura Securities analyst, Romit Shah, reiterated his Buy rating on shares of Intel (NASDAQ: INTC) and reiterated his price target of $40 despite voicing an increasing concern that Intel's increase in OpEx guidance is not just sandbagging for the incoming CFO but spending to address unexpected concerns.

Management implicitly raised operating expense guidance for 2017 by several percentage points relative to their forecast in April. The revised outlook is especially glaring when you consider that since April, consensus revenues for 2016 are $2b higher and the company sold McAfee, both of which are margin enhancing developments.

It is possible that Intel is just wanting to set conservative expectations for incoming CFO Bob Swan. This is the prevailing view among investors we spoke to. However, seeing the market’s reaction post earnings, it is likely more complicated. In addition, management talked about “reinvestment” several times during the earnings call. And that point was emphasized in the analyst's callback with the company. Amid weakness in the Datacenter Group, the analyst believes investors should be asking, “Which projects is Intel spending on that they didn't contemplate back in April? And why?”

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 $35.15 yesterday.

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