Wall Street explains why investors shouldn't be spooked by Intel's CEO resignation

Business InsiderIntel CEO Brian Krzanich
  • Wall Street analysts are saying Intel‘s crazy week of big news is mostly positive.
  • Intel CEO Brian Krzanich resigned after violating company policy, and the company raised its second-quarter earnings guidance.
  • Shares slid on the news.
  • Watch Intel trade in real time here.

Wall Street analysts are saying investors should hold their horses on selling Intel shares.

Shares slid 2% on Thursday after the company announced CEO Brian Krzanich was resigning due to violating company fraternization policies. The company also raised its second-quarter earnings-per-share guidance.

While Wall Street analysts have mixed opinions on the news of Kraznich’s resignation, they point the revised earnings guidance as evidence things are looking up for Intel. The chipmaker said it now sees second-quarter EPS at $US0.99, up from $US0.85 when it reports on July 26.

“Management change is always uncertain and some investors are drawing incrementally negative conclusions around 10 nanometres,” UBS analyst Timothy Arcuri wrote in a note out to clients (10 nanometres is the smaller chip Intel wants to produce). But Arcuri sees both the Krzanich news and EPS news as net positive.

“We have maintained estimates well above Street and are raising them slightly again to reflect the positive pre- announcement,” he said. “We are raising our estimated 2018 revised EPS (non-GAAP) to ~$US69B.”

Arcuri has a $US70 per share price target, well above the Wall Street consensus of $US60.18.

Meanwhile, JPMorgan analyst Harlan Sur raised his price target on the chipmaker to $US68 a share from $US65. “We see this preannouncement as further proof of strong data center cloud spending – a key investment theme for us this year,” Sur wrote in a note out top clients.

Perhaps most importantly, he thinks data center revenue looks promising going forward. “Overall, we have strong confidence that interim CEO Swan will continue to steer Intel in the direction of increased profitability and free cash flow, driven by the strength in data center compute and other data-centric businesses,” Sur added.

And while most analysts are confident in both the interim CEO and management’s ability to find a good replacement CEO, Credit Suisse analyst John Pitzer actually sees the Krzanich news as a negative. Still, he’s bullish. He sees the EPS revision outweighing Krzanich’s resignation.

“Krzanich’s departure is a negative and increases near-term uncertainty,” Pitzer wrote in a note out to clients. “We continue to see upside to our 2018 and 2019 EPS estimates and continue to rate the stock Outperform.” His price target is $US65.

Intel is down 4.94% this week, but up 14.11% this year.

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