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Intel Downgraded by Goldman to Sell on Fundamentals

Goldman Sachs cited a 'slowdown in PC builds and continued share loss for Intel in the client and server CPU markets.'
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Intel  (INTC) - Get Intel Corporation Report shares were little changed in an up market Monday, after Goldman Sachs analyst Toshiya Hari downgraded the stock to sell from neutral and cut his price target to $54 from $65.

“We upgraded the stock from sell to neutral March 24, as we believed the company would be an outsized beneficiary of WFH [working from home] through its exposure to the PC and server end-markets,” Hari wrote in an analyst note.

But now the scenario has changed, he said.

“With our recent industry checks indicating a slowdown in PC builds in the second half of 2020 and continued share loss for Intel in the client and server CPU markets, we reduce our 2021/2022 earnings estimates to below Street levels and return to a more cautious investment stance.”

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As for the specifics, “while notebook CPU shipments likely remained robust in 2Q20, per our checks, our view is that the strength in 1H20 was primarily a function of ‘pull-in’ of PC demand as opposed to a fundamental change in the long-term growth profile of the market,” Hari wrote. “As such, we expect PC demand to be sub-seasonal in 3Q20 and 4Q20, and for notebook CPU shipments to correct sharply following an extended period of ‘over-shipping’ relative to PCs.”

So what does that mean for Intel? “We estimate a 1% and 11% sequential decline in notebook CPU units in 3Q20 and 4Q20, respectively,” Hari wrote.

Intel shares recently traded at $59.15, up 0.03%, and have gained 9% over the past three months.