Citigroup added Intel Corp to its top picks live list, and said it expects the chipmaker to benefit from the near-term strength in the PC environment.
Despite concerns raised by peers, including a recent downgrade of Intel shares, the PC environment in the fourth quarter has been surprisingly strong, Citigroup said.
After under-performing the sector since mid-year, Intel shares will likely experience a period of near-term outperformance, the brokerage wrote in a note to clients.
"With structural improvements to gross margins and reduced startup and under-utilization charges, we are comfortable that high margins can be sustained," the brokerage said.
Citigroup said it was "especially comfortable" given the limited competitive offerings from Advanced Micro Devices in 2010.
The brokerage has a price target of $26 on Intel shares, which replaces "buy"-rated wireless technology provider Qualcomm Inc on Citigroup's top picks live list.
Shares of Intel were up 1 percent in premarket trade Wednesday, after closing at $19.80 Tuesday on Nasdaq.
(Reporting by Abhiram Nandakumar in Bangalore; Editing by Aradhana Aravindan)