Intel (INTC) needs to demonstrate a "leadership roadmap" in server CPUs for a positive investor recommendation, Morgan Stanley said in a Friday note.
The company reported Q3 adjusted earnings late Thursday of $0.52 per share on revenue of $16.51 billion. Analysts polled by FactSet expected EPS of $0.41 on revenue of $16.56 billion.
Intel's H1 PC exposure was difficult to predict as Morgan Stanley analysts thought that higher prices would compensate for lower sales volumes, but this did not occur. Aside from the weaker PC outlook for Q4, the server CPU business also came in slightly lower with the negative impact on supply from the Israel fab incident and substrate constraints, according to the note.
A leadership roadmap in server CPUs from Intel would engender a level of sustainability in earnings, while successful use of its process and fabs is expected to be a catalyst for the potential adoption of the company's foundry services, the analysts said.
Morgan Stanley maintained the company's stock rating at equal-weight and adjusted the price target to $75 from $84.
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