Bank of America upgrades Intel, says it can ride out a chip slowdown and the shares are cheap

Bank of America upgraded Intel to buy from neutral on Friday, saying the chipmaker is slated to outperform its large-cap peers in 2019.

“Trading at just 10 times price to earnings, Intel is a compelling large-cap investment levered to multiple secular advances — cloud, artificial intelligence, 5G, autonomous cars,” the bank’s analyst Vivek Arya said in a note on Friday.

The bank is seeing a 2.5 percent sales growth in 2019, a deceleration from 13 percent growth in 2018 on tougher data center comps. However, Intel’s growth rate is better than the bank’s core-semiconductors forecast of 1.5 percent, Arya pointed out.

“While the entire semiconductor sector is exposed to a cyclical slowdown, we like Intel’s more attractive exposure to more stable PC, enterprise, networking, and data center markets. Global growth slowdown is a risk but product shortages in late 2018 and replacement demand from aging base of PCs helped Intel avoid excess inventory concerns seen by its peers,” Arya said.

Bank of America also raised its 12-month price target for Intel to $60 from $52. From its $44.49 Thursday close, the price target will translate into a 35 percent gain.

Shares of Intel rose 2.9 percent in premarket trading from Thursday’s close.

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