Goldman Sachs Maintains "Sell" Rating on Intel on Margin Concerns (INTC)

Goldman Sachs Maintains “Sell” Rating on Intel on Margin Concerns (INTC)


Goldman Sachs reported on Monday that it has reiterated a “Sell” rating on technology company Intel Corporation (INTC).

The firm has maintained a “Sell” rating and $16 price target on INTC. This price target suggests a 28% decline from the stock’s current price of $22.29.

Analyst James Covello reported that he is concerned about the company’s excess supply and the rise in depreciation.

The analyst noted, “given our view that Intel’s stock price is highly correlated to gross margin, we see downside risk for the shares.”

“While much of the recent discussion regarding Intel’s gross margin has centered around declining ASPs and mix shift, we believe investors also need to consider Intel’s rising depreciation expense. We expect Intel’s depreciation expense will continue to rise over the next several years as Intel’s capex has increased to $10-$11 bn per year since 2011, yet we forecast depreciation will only be about $6.9 bn in 2013. We estimate the future increase in depreciation expense will be an incremental 200-600 bp headwind to Intel’s gross margin,” Covello added.

Intel shares were mostly flat during Monday morning trading. The stock is up 9% YTD.

The Bottom Line
Shares of Intel Corporation (INTC) have a 4.04% yield, based on Monday morning’s price of $22.29.

Intel Corporation (INTC) is not recommended at this time, holding a DARS™ Rating of 3.3 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks, as well as a detailed explanation of our ratings system here.