An analyst at J.P. Morgan says sell Intel stock, citing concerns about the company’s loss of market share amid ongoing competition and softening PC demand.
Following a period of restriction, J.P Morgan analyst Harlan Sur resumed coverage of Intel (ticker: INTC) with an Underweight rating and cut his 12-month price target to $32. The rating is down from his previous Overweight rating and $64 price target prior to restriction. Sur is concerned that other companies have performed better in this current macroeconomic environment, and Intel will struggle to regain its footing in the coming months.
“After several years of server CPU [central processing unit] share loss to Advanced Micro Devices and continued product execution missteps, we believe it will be several years before Intel is able to reverse the tide to reclaim technology leadership in hopes of regaining market share,” Sur wrote in a research note.
Sur said that as of the second quarter of this year, Intel’s revenue share of the server CPU market was about 77%, losing 1,000 basis points of share year over year, and 1,700 basis points over the last two years. On the opposite end, Sur expects AMD(AMD) to continue to gain share moving forward.
Overall PC demand weakness isn’t helping Intel either, Sur added. Multiple tech companies have cited demand weakness for personal computers, including AMD and Microsoft (MSFT) in their latest earnings reports.
“The PC/server compute market is anticipated to be weak over the next 12 months with PC units down 14%/5% in 2022/2023,” Sur said, citing J.P. Morgan research. He added that this will be a further pressure on Intel’s financials and continue to be an overhang on the stock as the market continues to be concerned over the sustainability of dividend payments.
Intel declined to comment on individual analyst opinions, but referredBarron’sto recent statements made by management during the company’s latest earnings release.
“Despite the worsening economic conditions, we delivered solid results and made significant progress with our product and process execution during the quarter,” Pat Gelsinger, Intel CEO, said in the company’s third-quarter earnings report. “To position ourselves for this business cycle, we are aggressively addressing costs and driving efficiencies across the business to accelerate our IDM 2.0 flywheel for the digital future.”
Intel has underperformed the broader markets this year, which also discourages Sur. Coming into Friday trading, the stock has fallen 41% in 2022 while the S&P 500 has declined 17%. Shares of Intel were down 2.3% Friday to $30.43.
“Given the market has time to gain confidence on Intel’s ability to execute in its core compute and diversification initiatives, we believe Intel will be an underperformer relative to the group over the next 12 to18 months,” Sur said.
Comments