The week went from bad to worse for Intel Corporation (Nasdaq: INTC) investors on Thursday after Stifel downgraded the stock from “buy” to “hold” and said Intel’s computer-server business may be peaking.
The downgrade comes just days after reports that Intel’s PC partnership with Apple ( AAPL) could be in danger, but Intel stock traded slightly higher on Thursday morning and some analysts still believe in the stock.
[See: 7 of the Worst Stocks to Buy for 2018.]
In his downgrade note, Stifel analyst Kevin Cassidy says Intel stock, which has gained roughly 35 percent since the July 2017 launch of its Xeon Scalable Architecture, is no longer a compelling value.
“While we may be early on this, we believe the [Xeon] upgrade cycle may peak in 2H18,” Cassidy says.
Prior to the downgrade, Intel stock had already dropped more than 4 percent this week after Bloomberg reported on Monday that Apple intends to start making its own PC chips starting as soon as 2020. Several analysts have said they are skeptical that Apple will fully transition away from Intel chips.
Bernstein estimates that about $3 billion in revenue, or between 30 and 40 cents per share of earnings, could be at risk if Intel loses Apple as a PC customer. However, the firm said the bigger risk is that Apple could trigger a domino effect and other Intel customers could start making their own chips as well.
Fortunately for Intel investors, UBS analyst Timothy Arcuri says Intel will continue to benefit from a secular boom in semiconductor demand, even if the current cycle is maturing. Arcuri says investors are under-appreciating Intel’s long-term growth potential and over-appreciating competitors like Nvidia Corp ( NVDA).
“Investors seem to be taking a narrow ‘winner take all’ view, but this time the rising tide will likely lift all semis boats over time,” Arcuri says. “This suggests a positive long-term bias.”
[Read: 7 Ways for Anyone to Invest in the Cloud.]
Even in his downgrade note, Cassidy says Intel has some attractive long-term opportunities.
“Longer term, we have a positive view on Intel’s strategy for transitioning to a data-centric company from PC-centric, though this may take years to develop,” he says.
In addition to the “hold” rating, Stifel has a $53 price target for Intel. UBS has a “buy” rating and $70 price target for INTC stock.
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Investors Shrug Off Intel Corporation (INTC) Downgrade originally appeared on usnews.com
