Intel rises as Morgan Stanley upgrades, citing 'balanced' risk-reward
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Intel (NASDAQ:INTC) shares rose around 1.5% in premarket trading on Thursday after investment firm Morgan Stanley upgraded the semiconductor giant, citing a "balanced" risk-reward.
Analyst Joseph Moore moved his rating on Intel (INTC) to equal-weight from underweight, noting that speculation surrounding the eventual dividend cut was "painful," but the company made the right choice in doing so and with the negative news out of the way, the stock could be a value for investors.
"We have long said that we would prefer to see Intel as a value stock with optionality for a turnaround in the core business, but that the ramp of fixed costs created too much risk for cash flow degradation," Moore, who also lowered the per-share price target to $28, wrote in a note to clients.
"With this [news] detailing the dividend cut, slight capex cuts, and further opex cuts, we see a management team that is now working to return to a more disciplined approach with regards to capital management and allocation."
In addition, Intel (INTC) has a roughly $30B stake in Mobileye (MBLY) given that it owns a 94% stake in the recently spun-out company, as well as an undisclosed "material" stake in Chinese chip company Montage Technology and more than $80B in fab assets, compared to just $12B in debt, Moore explained.
On Wednesday, Intel (INTC) said it would cut its quarterly dividend to 12.5 cents a share from its earlier payment of 36.5 cents a share. In a statement, Intel (INTC) explained the dividend cut as part of a "deliberate approach to capital allocation [that] is designed to best position the company to create long-term value."
In addition to the dividend cut, Intel (INTC) reiterated its first-quarter forecast for an adjusted loss of 15 cents a share, with revenue forecast to be between $10.5B and $11.5B.
Moore added that the dividend cut of roughly 60% brings Intel (INTC) more in-line with industry peers and is the "right thing to do longer term," but it's a wonder why the company is even paying a dividend at all, given its cash needs as it transitions towards becoming a foundry.
"From our standpoint, paying a dividend at all - even the remaining $0.50/share - is counterproductive, given an ambitious and highly capital intensive strategy to return to growth across a wide variety of businesses," Moore explained. 
Moore added that there is still likely to be additional pressure on Intel's (INTC) core business and free cash flows, but the value in the stock "should shield further downside."
Seeking Alpha contributor Trapping Value recently said Intel's (INTC) dividend cut will likely do little to keep the company's shares from losing more value as the year goes on.
Analysts are universally cautious on Intel (INTC). It has a HOLD rating from Seeking Alpha authors, while Wall Street analysts rate it a HOLD. Additionally, Seeking Alpha's quant system, which consistently beats the market, also rates INTC a HOLD.