Intel (INTC) stock slumped sharply Friday after an analyst cut his price target and estimates on INTC because of near-term PC trends.
Thing is, nothing really fundamental has changed.
It’s already well-understood that Intel dominates a market in a stagnant industry and future growth depends on other endeavors.
Intel stock was off by almost 4% early in the afternoon — a big move for a company with market capitalization of close to $150 billion that also happens to be a component of the Dow Jones Industrial Average. That INTC slipped in a rising market wasn’t very reassuring either.
The proximate cause for the selloff in Intel stock was the action of a Jefferies analyst. Mark Lipacis lowered his 2015 earnings estimate to $2.25 per share from a prior projection of $2.37. The analyst also slashed his 2016 EPS estimate to $2.82 a share from a previous estimate of $3.
As a result of trimming his forecasts, Lipacis lowered his target price on Intel stock to $45 from $48 over the next 12 months or so.
Importantly, however, the analyst did reiterate his “buy” rating on INTC.
The analyst said the earnings revisions and reduction in target price were due to some downbeat commentary on the part of Micron Technology (MU). The maker of memory chips missed Wall Street’s profit and sales estimates, and offered lackluster guidance.
PC Slump Is Old News for Intel Stock
To no one’s surprise, MU blamed the usual suspect. As Lapcis wrote in a note to clients:
“On its [quarterly] earnings call, MU noted weaker than expected PC trends. It also noted below normal channel inventories.”
Intel is struggling to profitably diversify amid a PC industry that appears to be in secular decline. It missed its chance in the faster growth smartphone and tablet markets, which would have helped make up for weakness in PCs.
But it’s not exactly earth-shattering news that short-term PC sales might come in short of industry forecasts. Besides, MU said it expects the PC market to pick up seasonally in the second half thanks in part to the release of Windows 10 and a new microprocessor unit from Intel. (Too bad the semiconductor company kind of undercut any optimism on the part of the market by issuing light guidance.)
Regardless, the action in Intel stock on the news was a classic knee-jerk overreaction. A single analyst sliced a price target — albeit by 6% — but he reasserted his “buy” call on Intel stock.
INTC lost about as $4 billion in market capitalization in a matter of hours … but is the company really worth that much less on something that falls far short of a news flash?
Whether you’re a bear or a bull, the developments that knocked around Intel stock Friday shouldn’t change your view.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
