Citi Names Intel A Top Pick, Calls Stock 'The Micron Of 2018'

Intel Corporation (NASDAQ: INTC) shares have underperformed their peer group for years, with valuation at a discount relative to its peers, an analyst at Citigroup said.

The Analyst

Citi analyst Christopher Danely maintains a Buy rating on the shares of Intel.

The analyst named the shares as his top pick as well as the "Micron Technology, Inc. (NASDAQ: MU) of 2018." Micron gained nearly 90 percent in 2017.

The Thesis

The recovery in the enterprise end-market bodes well for Intel, Danely said in a note. (See the analyst's track record here.)

The segment contributes over 50 percent of total sales, but has posted year-over-year declines for the past three years. A recovery in the enterprise end market will drive consensus estimates higher, the analyst said. 

"The enterprise end market drove upside to Intel in 4Q17 and we believe it will be sustainable in 2018, driven by the improving economy and increased spending from tax reform," Danely said. 

Investors have pushed back harder on Citi's Buy rating on Intel than they did when the firm had a Buy on Micron in late 2016, the analyst said.

Intel's combination of "very low" sentiment and significant upside to the consensus is similar to Micron in 2017, Danely said, adding that Micron was the biggest positive surprise in its coverage universe in 2017.

The Price Action

Intel shares are up over 35 percent over the past year. This compares to Micron's 105-percent gain and NVIDIA Corporation (NASDAQ: NVDA)'s 143-percent jump.

During the same period, Advanced Micro Devices, Inc. (NASDAQ: AMD) shed over 12 percent.

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