Why Intel Corporation Shares Could Fly 15%

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Intel  (NASDAQ: INTC  ) gained slightly this morning after Imperial Capital initiated coverage on the chip gorilla with an outperform rating.

So what: Along with the bullish call, analyst Ashok Kumar planted a price target of $37 on the stock, representing about 17% worth of upside to yesterday's close. So while contrarian traders might be turned off by Intel's year-to-date price strength, Kumar's call could reflect a sense on Wall Street that its top-line growth prospects still aren't fully baked into the valuation.

Now what: According to Imperial, Intel's risk/reward trade-off is rather attractive at this point. "We see improving sales for both desktop and notebooks PCs from pent up corporate demand and Microsoft's license fee reduction for value priced PC fueling emerging market sell-through," said Kumar. "Intel now expects some yoy revenue growth for 2014 versus prior expectations of flat top line. We believe that current Street 2014 revenue estimate of $54.6bn, up 4%, could prove conservative. The stock remains highly correlated with gross margins. Gross margins for the year are expected to come in the upper half of the prior outlook of 61%, +/- a few points." When you couple that upbeat outlook with Intel's still-solid dividend yield of 3%, it's tough to disagree with Goldman's bullishness. 

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