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 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.”

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.