Goldman Says Avoid Intel

Goldman Sachs is out with a research report on Intel INTC, and it is saying to avoid the stock. It has a Neutral rating on the stock and a $20 price target. In a note sent to investors, Goldman writes, "While the Street has been getting more positive on Intel with several recent upgrades, we see both 2011 and longer-term challenges due to the rise of tablets. For 2011, if the McAfee and Infineon transactions close by the end of 1Q and are accretive as management expects, Street estimates would likely be revised higher. After this potential adjustment, we see risk to 2011 Street estimates from (1) slower unit growth, (2) ASP declines, and (3) lower gross margins due to decreased utilization and 22nm start-up costs. Our analysis and industry discussions suggest that Intel's 2011 tablet share will be modest. Longer term, with PC OEMs now engaged with ARM chip vendors, the software ecosystems at Apple and Android growing quickly, and Microsoft potentially enabling Windows for ARM, we believe Intel will face increased processor competition. Given Intel's 3% dividend yield, resumed buyback, and the 81% increase in November short interest, we remain Neutral rated on the stock and prefer TXN in large-cap semis." Shares of INTC closed at $21.91 on Friday, up 10 cents.