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Pat Gelsinger, the CEO of VMware, will take over from Bob Swan at Intel.
David Ramos / Getty Images
Investors should be aware of when a group of financial analysts – who are often obsessed with secretive things like changes of hundredths of a percentage point in gross margins – make changes to their stock estimates following a change in leadership.
That’s what happened on Thursday after Intel said CEO Bob Swan would be succeeded by VMware CEO Pat Gelsinger, an
Intel
alumnus, on February 15. Analysts appreciate the switch.
Intel (ticker: INTC) stock closed 4% at $ 59.25 on Wednesday after a 7% advance.
Ambrish Srivastava, analyst at BMO Capital Markets, raised his target price from $ 50 early Thursday from $ 50 to $ 70. His reasoning revolves around Gelsinger’s experience at Intel, where he worked for 30 years, and VMware, which he has led since 2012.
“While we don’t expect major changes in the near term, the wealth of experience Pat Gelsinger brings from his previous tenure at Intel and his experience with VMware, we believe he is the right person to tackle the daunting, but not insurmountable challenges with Intel is facing it, ”wrote Srivastava.
The analyst added that due to the number of disappointments Intel has encountered, even a few baby steps in the right direction should push stocks up. He also pointed out the success of an Intel rival,
Advanced Micro Devices (AMD),
led by Lisa Su, who Barron’s has been listed as one of the world’s top CEOs.
Atlantic Equities also increased its target price on Intel stock from $ 36 to $ 55. Atlantic analyst Ianjit Bhatti has upgraded the stock to the equivalent of a Hold, arguing that the company expects it to meet its own expectations for the fourth quarter will surpass. He said Gelsginer is a proven CEO given his time at VMware – he reportedly faked the company’s name tattooed on his arm when he took that job – and has a deep understanding of Intel and the chip business.
“We are upgrading to Neutral given the caliber of the new Intel CEO, the possibility of more radical strategic changes and our expectation that the market will be willing to see through any negative news flow any time soon as a new strategy is formulated and implemented , Bhatti wrote.
Morgan Stanley increased its target price from $ 60 to $ 70, improving the stock to the equivalent of a purchase. Analyst Joseph Moore warned investors in a note on Thursday that there were no easy solutions to the company’s problems, but said that with the help of new leadership, risks could diminish over time.
Chief investment strategist Eric Ross at Cascend Securities was not that quick to cheer. In a note on Thursday, he wrote, “Intel stock shouldn’t go up on Bob Swan’s departure – this is just admitting the problem.”
Ross says Swan was only part of the company’s weakness, and the underlying problem is the technical challenges. They could take more than three years to recover – and even that’s an optimistic assessment, he says. While Intel struggled,
Semiconductor manufacturing in Taiwan
(TSM) has been at the forefront of manufacturing technology, a setback from which Intel may never recover, he says.
Shares of Intel have returned about 2% in the past year as the PHLX Semiconductor index is up more than 50%.
Write to Max A. Cherney at [email protected]