Susquehanna Downgrades Intel, Questions Management's Guidance

Susquehanna's bullish stance on Intel Corporation INTC dates back to September 2016, but can no longer be justified after reporting mixed fourth-quarter results and questionable guidance for the full year 2019.

The Analyst

Susquehanna's Christopher Rolland downgraded Intel from Positive to Neutral with a price target lowered from $58 to $50.

The Thesis

In conjunction with Intel's earnings report, management guided its key data center business to show a single-digit year-over-year growth in 2019 and hinges on an "overly aggressive" re-acceleration in the back half of 2019, Rolland said in a note. Investors have four reasons to be skeptical, he said:

• 1. Intel faces tough comps in 2019 after showing one of the "most significant" server refresh cycles ever in 2018.
• 2. Even when including the ramp of Cascade Lake and the Whitley platform, Intel still lacks any compelling new server features.
• 3. Some of Intel's clients waiting for 10nm parts won't see delivery in 2019 and may have to wait until 2020.
• 4. Intel could see server share losses at the expense of rival Advanced Micro Devices, Inc. AMD.

Management's own commentary foreshadows a slowdown in data center won't improve in the first quarter, Rolland said. Specifically, Navin Shenoy, general manager of Intel's Data Center Group, said "The signals we get from our customers is a period of build for compute is going to shift now to a period of consumption and that started in the second half of the fourth quarter and we expect that to continue through the first half of the year."

Price Action

Shares of Intel were trading lower by 7.3 percent at $46.11 Thursday morning.

Related Links:

Intel Analysts Debate: Should Investors Buy The Dip?

Benzinga's Top Upgrades, Downgrades For January 25, 2019

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