Intel Corporation Downgraded To Underperform By JMP Securities

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Intel Corporation Downgraded To Underperform By JMP Securities
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Intel has been downgraded to Under perform rating from Market Perform by the JMP Securities. Analyst Alex Gauna assigned the chip maker a price target of $30, noting “our diligence with industry sources revealed that there been a sharp reduction in server activity entering 2015.”

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Challenges for Intel

For the most recent quarter, Intel Corporation (NASDAQ:INTC) posted a year over year increase of 6% in the revenue along with a gross margin of 65.4%. The report notes that Intel would not be able to maintain its 65% gross margin in the chip server sales slowdown. Analyst note that the slowdown in server sale may not go well with the company, and would result in the flocked inventory of CPU. Intel reported a rise of 11% quarter over quarter and 25% year over year growth in its data center revenue in the fourth-quarter. Intel has guided its CAGR of CPU division to be a 15% through the year 2018 driven by strong cloud server demand.

Gauna notes that tech companies like Samsung, GlobalFoundries US Inc., and Taiwan Semiconductor are winning orders from Apple, which could be seen as a threat for Intel. According to the analyst, the iPhone maker is designing its own ASIC for OS X in Macs, and there are various foundry options available in the market, which is again a serious threat to Intel even after it wins some “contracts for itself.”

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Rating from analysts

A few days back, the chip maker posted its fourth-quarter earnings result for the fiscal year 2014. Even though the earnings largely came in positive, analysts are concerned about the future outlook for the company.

Intel has received rating from various analysts after its fourth-quarter earnings reports. Total of five sell-side firms have revised their ratings on the stock. Analyst at B. Riley assigned Buy rating to the stock with a price target of $43. Summit Research Partner maintained a price target of $32 on the chip maker while Pacific Crest Securities has rated the stock as Outperform with a price target of $42. Recently, Goldman Sachs analyst James Covello placed a Sell rating to the chip maker citing upcoming challenges in the PC market.

Overall, twenty-two analysts rate Intel a Buy, twenty-one have assigned a Hold rating, while eight have rated it as a Sell. Intel has a consensus price target of $37.49.

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Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com
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