'It's Hard For The Stock To Work,' Barclays Says Of Intel In Downgrade

The Intel Corporation (NASDAQ: INTC) story has shifted from expectations for PC and server growth to beat low expectations to  the company's "slippage" in the competitive landscape, according to Barclays.

The Analyst

Barclays' Blayne Curtis downgraded Intel from Overweight to Equal-Weight with a price target lowered from $62 to $53.

The Thesis

Intel's PC and server businesses are outperforming versus "very low expectations," but investors should no longer be bullish on the stock given competitive concerns, Curtis said in the downgrade note. (See the analyst's track record here.) 

Intel believes it can maintain its performance advantage even with a process node disadvantage, but the company has provided minimal evidence for this, Curtis said. 

In conjunction with the Intel downgrade, Barclays lifted its price target on competitor Advanced Micro Devices, Inc. (NASDAQ: AMD). Intel needs to demonstrate its next generation of chips can perform better than AMD's; the competitor will launch its seven nanometer products by the end of 2018, as opposed to Intel, which will launch its 10-nanometer chips in 2019, the analyst said. 

Intel's next CEO is unlikely to be a "disruptive" external candidate who can focus on costs ahead of 2019, which will likely be a year of margin pressures related to a ramp in 10nm and memory, Curtis said. It's "hard for the stock to work" when the margin picture is unclear, he said. 

Price Action

Intel shares were down more than 1 percent at the time of publication Monday at $48.78, while AMD shares were rallying 4.16 percent to $19.26. 

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