Bernstein Downgrades Intel To Underperform, Sees Little Chance Of Good News

In a report published Tuesday, Bernstein analyst Stacy A. Rasgon downgraded the rating on Intel Corporation (NASDAQ: INTC) from Market Perform to Underperform, while lowering the price target from $29 to $25. The analyst sees "little prospect for good news" for the stock, while expecting things to get worse.

The analyst believes that the growing signs of weakness in the datacenter segment could be potentially more damaging for the company than any weakness in PCs.

"Last week we previewed Intel's quarter, taking our numbers down on weak PCs (not a surprise). However, at that time we also highlighted a number of (somewhat circumstantial) indicators that suggested potential for further weakness," Rasgon said.

These indicators included layoffs, unexpected departures from the management team, large, non-accretive yet expensive deals, and expectations of delays in the new mobile products and Intel's 10nm roadmap.

"More generally, we note that many of the elements of the structural thesis we highlighted for years seem to be playing out, including notebook ASP declines, heavy (indeed, disastrous) mobile losses, and (until recently) high capex," the Bernstein report stated.

The analyst also expressed concern regarding the large amount spend on recent acquisition of "questionable value," along with Intel subsidizing its "uncompetitive" mobile chips to gain market share. The process node transitions have also been meaningfully delayed.

"We can't help but get the feeling of some "flailing about" on the part of the company, as they attempt to find their next pivot while their core business comes under increasing pressure," Rasgon added.

The revenue estimates for Q2, 2015, 2016 and 2017 have been lowered.