Intel Corp (Nasdaq: INTC) hogged the limelight on Friday after Harlan Sur, an analyst at JPMorgan Chase, resumes coverage of the stock with an “underweight” rating. Notably, the stock had an “overweight” rating before the coverage. While issuing the rating, the analyst expressed worries about the semiconductor chip manufacturer’s decline in market share against the backdrop of increasing competition and easing PC demand.
Furthermore, JPMorgan stated that Intel will certainly play its part in the industry upturn, but at a leaner pace due to cutthroat competition. The share price of Intel ended Friday’s trading session at $30.43, up 2.25% or $0.67 from its prior close.
According to Harlan Sur, the Santa Clara, California-based company’s competitors have performed well in this prevailing macroeconomic scenario, and the chip maker is poised to remain under stress to recapture the lost market in the months ahead.
Specifically, in a note to clients, Sur wrote that “after many quarters of server CPU [central processing unit] market share decline to Advanced Micro Devices (AMD) and continuing strategy execution errors, we think that it will take many years for Intel to halt the trend and retake technical expertise in an effort to restore market dominance.”
To validate the statement, Sur issued empirical data that indicates that Intel’s current server market share of 77% is 10% lower on a y-o-y basis. Over the last two years, as per the data provided by the analyst, Intel had lost 17% of its market share. On the contrary, as per Sur, Intel’s competitor AMD has been gaining market share and is expected to do so in the months ahead.
The analyst also pointed out that the sluggish demand for PC and servers is also affecting the performance of Intel. Several tech giants, including Microsoft (MSFT) and AMD, have mentioned slackening demand for PCs in their latest quarterly earnings reports.
The JPMorgan analyst expects the PC and server computer market to remain weak in the year ahead. In particular, PC sales are forecast to record drops of 14% and 5% in 2022 and 2023, respectively. He further stated that this will put additional pressure on Intel’s financials and affect the performance of the stock as investors will be worried over the ability of the company to maintain its dividend.
So far this year, the share price of Intel has recorded a value erosion of 42% while the S&P 500 has fallen by 17%.
So, considering the fact that the market needs time to regain confidence in Intel’s strategy execution ability related to diversification endeavors and its core computing business, Sur expects Intel to remain an underperformer, compared to other players in the industry, over the next one to one and a half years.
Based on the aforesaid details, the JPMorgan analyst issued an “Underweight” rating for the stock and slashed the 12-month price target to $32. Notably, the previous price target was $64.
The rating downgrade is expected to keep the shares of Intel bearish in the short term.
Technically, the stock of Intel is rising after testing the support at 27. The next major resistance is expected only near 35. Additionally, the stochastic oscillator is in the oversold region. Therefore, we anticipate the share price of Intel to increase further in the days ahead.
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