3 Reasons Why Bernstein Downgraded Intel

Intel Corporation INTC got some love from Wall Street after its most recent quarterly report, but one Wall Street analyst said the software company has too many structural issues for investors to own the stock long-term. 

The Analyst

Bernstein analyst Stacy Rasgon downgraded Intel from Market Perform to Underperform and lowered the price target from $54 to $42.

The Thesis

The unexpected departure of Intel's CEO provides just enough uncertainty for the market to limit upside for the stock, while there are several factors creating potential downside at the moment, Rasgon said in a Tuesday downgrade note. The analyst identified three potentially bearish issues at Intel: 

• It’s unlikely Intel will revise its guidance higher until its management situation is sorted out.
• EPS growth will likely slow in 2019, especially as Intel starts to face more difficult comps from 2018.
• Intel is facing unprecedented competition, which could both weigh on earnings numbers and potentially lead to earnings multiple contraction.

To make matters worse, Rasgon said Intel’s delay in rolling out its 10nm chips means the company will enter a new product cycle without being in the leadership position for the first time.

“Recent data center strength will prove challenging to follow up, with a massive build-out this year that may require digestion, correspondingly tough compares and a competitive environment that looks tougher than it has in many years."

Price Action

Intel stock was trading down 2.15 percent Tuesday morning following the downgrade.

Related Links:

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Nomura Downgrades Intel Following CEO Departure