What Do These Downgrades Mean for Intel?

With the market for personal computers in a severe slump due to the rising popularity of smartphones and tablet computers, analysts are beginning to downgrade their ratings on Intel (NASDAQ:INTC).

What Do Analysts Think about Intel?

This week, Goldman Sachs analysts maintained a Sell rating on the stock and lowered their price target from $20 per share to $16 per share. As the StreetInsider reported on Thursday, the Sell rating was based on “cyclical concerns” rather than a belief that personal computer industry is dying. Analysts at Sachs are worried that Intel has too much inventory on hand for current PC sales projections, which show a decline this year for the first time in a decade. If the company continues to have surplus inventory, Goldman Sachs expects margins to decrease for the next couple quarters.

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“We expect excess supply as Intel and AMD (NYSE:AMD) have record inventory,” said analyst James Covello in a research note. He also pointed out that Intel’s stock, which is highly correlated to its margins, could be affected as the company’s supply increases.

Analysts at Citigroup also lowered their price target on Intel’s stock to $21 per share, but maintained a Neutral rating.

CHEAT SHEET Analysis: Are These Ratings a Negative Catalyst for Intel’s Stock?

One of the core components of our CHEAT SHEET Investing Framework focuses on catalysts that will move a company’ stock. Rating downgrades indicate that a company is not expected to perform well in the near future. In this case, analysts are giving increasingly lower price targets on Intel’s stock, which signals to investors that the company’s shares are overvalued.

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