Intel slides as analyst says sell with semis seen in cyclical downturn
Shares of Intel (INTC) are slipping after Raymond James analyst Chris Caso downgraded the stock to Underperform, a sell-equivalent rating, based on cyclical concerns regarding the semiconductor sector following checks in Asia. The analyst sees a number of headwinds mounting against the company, set to impact longer-term growth expectations and profitability. Caso also downgraded chipmaking peers Analog Devices (ADI), Microchip (MCHP) and ON Semiconductor (ON) to neutral-equivalent ratings, and Monolithic Power (MPWR) to Outperform. SELL INTEL: In a research note to investors this morning, Raymond James' Caso downgraded Intel to Underperform from Market Perform based on sector cyclical concerns following checks in Asia. He believes there are a number of headwinds mounting against the company, set to impact longer-term growth expectations and profitability. Caso pointed out Intel's CPU shortages are well-know, but recent checks suggest shortages on some new high margin SKUs, which will limit near-term upside. Additionally, the company's delay in 10nm production is its biggest strategic problem as it creates a window for competitors to gain share which it may never overtake, he contended. PEERS ALSO DOWNGRADED: Citing his checks in Asia, Raymond James' Caso downgraded Analog Devices to Market Perform from Outperform as he believes there has been a negative sentiment shift during the month of September among suppliers, with several trends clearly worsening. The analyst has concluded that the semiconductor sector has entered a cyclical downturn and has made a broad call to downgrade nearly all of his stocks under coverage. Caso does not believe Analog can escape the effects of industry trends and prefers to move to the sidelines. The analyst also downgraded Microchip to Market Perform from Outperform on worse trends since the August earnings call, and ON Semiconductor to Market Perform as well, as he believes the company cannot escape the effects of industry trends. Not as bearish on Monolithic Power, Caso cut the stock's rating to Outperform from Strong Buy and maintained a $160 price target. The analyst argued that Monolithic's design success should allow it to continue to grow, and views a 20% long-term growth rate as reasonable. 'SOFTENING' CYCLE METRICS: Meanwhile, KeyBanc analyst Weston Twigg launched coverage of 10 semiconductor names, including Intel with a Sector Weight rating. While the analyst forecasts good growth in Intel's non-PC divisions, he views the slowdown of the company's node transitions as an erosion of competitive advantage, and expects headlines of share loss to AMD (AMD) and Nvidia (NVDA) to be a chronic headwind for the stock. Still, Twigg expects Intel to remain dominant in its markets, and the company should remain highly competitive and profitable as cloud, AI, and machine learning drive the next wave of compute. Alongside Intel, the analyst also started coverage of Analog Devices, AMD, Microchip, Maxim (MXIM), Nvidia, On Semiconductor, Qualcomm (QCOM), Silicon Motion (SIMO), and Texas Instruments (TXN), all with Sector Weight ratings. Twigg cites "softening" cycle metrics, near-term demand dynamics, and trade war risks that will likely present near-term headwinds for the stocks. Nonetheless, the analyst noted that he is constructive on the long-term trajectory of the industry as new demand drivers emerge, and views consolidation and scale as strategic competitive advantages for larger-cap stocks. PRICE ACTION: In afternoon trading, shares of Intel have dropped about 2% to $46.10.