Morgan Stanley analyst says he’s shifting away from value stocks—and questions whether Intel actually is one
Intel Corp. may have gotten a callout in President Joe Biden’s State of the Union address earlier in the week, but on Thursday it fell further down Morgan Stanley’s list of chip names.
Morgan Stanley’s Joseph Moore downgraded Intel’s stock INTC, -0.26% to underperform from equal weight Thursday, as part of what he said was a move to “rebalance” ratings and “shift away from inexpensive cyclical stocks, at the margin.”
“Downgrades of value stocks such as Intel and Qorvo QRVO, -1.87% will let us focus on more actionable situations that offer relatively more attractive risk-reward going forward,” he continued.
Intel shares were off 2.4% in Thursday morning trading. Meanwhile, the PHLX Semiconductor Index SOX, -2.27% shed 2.3% and the Dow Jones Industrial Average DJIA, -1.40% fell 232 points, or 0.7%.
While Moore likes Intel’s new chief executive Pat Gelsinger and sees promise in the company’s longer-term opportunity to turn around its core business, he expects that Intel’s stock “will move sideways” over the next few years.
“While we would like to see Intel as a value stock, with optionality from a turnaround in the core business, the reality is that ramp of fixed costs creates a more ‘all-or-nothing’ situation where the company is going to need to succeed in these new businesses—and still turn around their core business—or be looking at long-term gross margin and cash-flow degradation,” he wrote.
Moore cut his price target on Intel shares to $47 from $55.
He also downgraded shares of Qorvo Inc. and Teradyne Inc. TER, -2.51% to equal weight from overweight.