SAN FRANCISCO—Citing concerns that Intel Corp. could offer a third quarter sales target that falls below its historical seasonal pattern, a Wall Street analyst Thursday (June 16) downgraded his firm’s rating on Intel stock from “outperform” to “market perform,” equivalent to a rating of “hold.”
Meanwhile, the analyst—Craig Berger of FBR Capital Markets—upgraded FBR’s rating on Intel rival Advanced Micro Devices Inc. (AMD) from “market perform” to “outperform,” equivalent to “buy.”
Berger wrote in a report circulated Thursday that Intel’s shares have solidly outperformed the Philadelphia Stock Exchange’s SOX semiconductor index since reporting its first quarter numbers, but said a 20 percent share price upside should be more easily achieved owned AMD than Intel. Intel’s stock traded near $21.41 in mid-day trading Thursday, down slightly from Wednesday’s close.
“We are not negative on Intel near $22, we just want to limit exposure to PC chip stocks, while recognizing the potential for more earnings growth with AMD in 2H11,” Berger wrote. Intel’s shares “have herculean difficulties breaking out above $24,” Berger added.
FBR analysts think that Intel’s second quarter results are tracking solidly, but the firm is concerned that the company’s third quarter sales target could come in below seasonal norms because a boost in second quarter sales driven by Intel’s Sandy Bridge processor could make increasing sales in the third quarter more difficult, Berger wrote. Intel is set to report second quarter results July 20, when the company is also expected to provide its third quarter sales target.
Meanwhile, checks with OEMS following the Computex computer show suggest that AMD could pick up some market share in microprocessors with Hewlett-Packard Co., Acer Inc. and Dell Inc., Berger said.
Intel’s sales in the third and fourth quarters are also likely to be hurt by the expected transition of Apple’s iPhone from Intel’s legacy Infineon Technologies AG 4GS basebands to chips made by Qualcomm, as has been reported, Berger said. This would mean a 1 percent hit to Intel’s annual sales, he said.
Saying that FBR analysts still feel that Intel’s stock is likely to trade at between $19 and $25 in 2011, Berger lowered the firm’s target price for Intel’s stock to $26 from $27. Berger raised his target for AMD’s stock price to $12 from $10.