Intel Stock: Is Security Report an Opportunity?

Posted On January 5, 2018 3:11 pm

Intel Corporation (NASDAQ:INTC) is in the news after the bombshell report by the technology publication, The Register, which says that Intel chips made over the last 10 years have a serious security flaw that makes computers vulnerable to cyberattacks. The flaw in Intel’s microprocessors affects the part of the computer chips and memory which deal with highly secure and critical data like registers that save passwords. The report also says that vendors like Microsoft and Apple will have to release new software patches to make their Intel processors secure. But this would result in massive performance degradation. As a result of this report, AMD is gaining value, and Intel stock is down.

GBH Insights analyst Dan Ives said in a report that the recently revealed security flaw is a “black eye” for Intel and AMD is a “natural beneficiary” of Intel’s problem. Ives thinks that the problem is a PR nightmare for Intel. Investment firm Bernstein also published a bearish report for Intel stock after the revelation from the Register. Bernstein gave an “underperform” rating for the stock. The firm said in its report that Intel’s potential ongoing liability outweighs the company’s positives.

Bernstein analyst Stacy Rasgon compared the latest security flaw with the Pentium FDIV bug from 1994 and the $700 million charge for the Cougar Point chipset problem in 2011. The analyst believes that the current problem is “much bigger” that the previous two incidents. Rasgon has a price target of $34 for Intel stock.

However, some analysts believe that the market is overreacting to the latest report regarding the security flaw in Intel chips. They believe that Intel shares should be bought on the weakness. Piper Jaffray chief market technician Craig Johnson thinks that investors should only get worried if Intel stock goes below $43. Otherwise, the analyst believes that there is no need to panic.

Intel’s fundamentals remain strong. If you are a long term investor, you should not sell the stock based on a single report. Intel recently beat top and bottom line estimates for the third quarter. The company’s data center and memory chips business is thriving. Intel has successfully depleted its dependence on the PC industry. Over 45% of the total revenue is now coming from the data center industry. Intel is also cutting its expenses. In the third quarter, Intel’s SG&A was about 280 basis points less than a year ago.

Related: Here’s Why You Should Buy Microsoft Stock Today


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