Intel Shares Drop 4% on Rating Cut
Some Intel Corp. shareholders might be starting to think that Merrill Lynch & Co. analyst Tom Kurlak has a chip on his shoulder.
Intel shares fell 4% on Thursday after the influential analyst--whose reports have been credited with moving the stock in the past--cut his rating on the world’s largest chip maker, saying its sales growth is sure to slow.
Intel shares dropped $3.56 to close at $86 on Nasdaq. The stock hit $91.44 on Tuesday, the highest level in almost six months.
Kurlak said Intel will have trouble achieving high revenue growth in coming years because microprocessor prices are falling as lower-priced personal computers grow in popularity.
“With its average selling price falling, and with total PC unit growth maturing to a lower rate, it will be hard for Intel to maintain its current level of PC processor revenues in the years ahead,” Kurlak wrote in a report.
It isn’t exactly news that Intel has been hurt by lower-priced PCs. But Kurlak’s numbers may have spooked some people: He said he expects Intel’s sales growth to slow to about 9% annually from 30% in the past.
He also lowered his rating on the shares to long-term “neutral” from long-term “accumulate.”
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Kurlak’s views carry a lot of weight with investors because the 19-year Merrill veteran has been right about the company’s fortunes at critical times.
He turned bearish on chip makers in general on Aug. 22, 1997, citing a global oversupply of semiconductors that he figured would cause prices to plummet.
The SOX index, a key index of semiconductor stocks, reached its all-time high on Aug. 20 last year, and is down 38% since.
In March, Kurlak said chip companies were poised for another “reality check” because of continuing weak demand. The next day, Intel warned that first-quarter earnings would fall short of forecasts because of reduced orders from PC makers.
In recent days other chip companies--including National Semiconductor, LSI Logic and Analog Devices--have issued disappointing earnings reports or warned of worse-than-expected weakness in orders.
Still, Kurlak is at odds with other Intel analysts, many of whom believe that the Santa Clara-based firm can keep up the brisk revenue growth that investors have grown accustomed to by developing new products. PC sales, they note, are also rebounding, helping Intel’s main business.
“I completely disagree” with Kurlak, said Dan Niles, analyst at Robertson Stephens & Co. in San Francisco. “I wish I could upgrade the stock,” said Niles, who already calls it a “strong buy,” his firm’s highest rating.
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Not A Good Day
Stocks of semiconductor companies were slammed nearly across the board on Thursday after an analyst made downbeat comments about Intel’s prospects. A sampling of chip stocks:
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52-week 52-week Thurs. Thurs. Stock high low close Change Advanced Micro Dev. $42.75 15.19 $17.81 -$1.00 Analog Devices 39.63 20.75 19.75 -1.75 Intel 101.25 65.63 86.00 -3.56 Lattice Semicon. 74.50 25.63 30.00 -0.63 LSI Logic 35.19 15.63 15.13 -0.69 Micron Technology 48.13 20.06 32.25 -2.06 National Semicon. 42.88 11.56 11.56 -2.06 Texas Instruments 71.25 39.63 58.88 -1.63 VLSI Technology 38.69 12.25 12.19 -1.63 Xilinx 55.63 28.50 40.50 -1.75
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Note: 52-week low prices don’t include Thursday’s trading.
Source: Reuters
