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At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.
But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we'll be tracking the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.
Two days after one analyst, Broadpoint AmTech, published broadly bullish sentiments on the global semiconductor industry, along came Jefferies yesterday morning and said "Not so fast, there." Judging from Jefferies' report, semiconductor prices will not "largely remain on a stable curve," as AmTech had suggested. Chip shipments will not stop at a 20% decline in 2009, nor will they pop back up 15% in 2010 just on AmTech's say-so.
To the contrary, Jefferies seems terribly pessimistic here. Out of 17 semiconductor stocks discussed in yesterday's report, the banker upgraded just two stocks, downgraded 11 more, and maintained buy recommendations on four. Said four include some widely held names: Broadcom (Nasdaq: BRCM ) , Qualcomm (Nasdaq: QCOM ) , and Silicon Labs (Nasdaq: SLAB ) -- but shareholders in these companies shouldn't get too cocky. Jefferies cut its price targets on both Qualcomm and Silicon Labs. As for the upgrades, those went to Xilinx (Nasdaq: XLNX ) and Altera. Meanwhile, downgrades went from A to almost Z -- AMD (NYSE: AMD ) to Texas Instruments (NYSE: TXN ) .
Look who's talking (about Intel) now
Jefferies' most notable turnabout was certainly Intel (Nasdaq: INTC ) . The analyst pulled a full 180 on that one, dropping the stock's rating all the way from "buy" to "underperform," but for the life of me I cannot imagine why Jefferies picked this stock in particular for a drubbing.
I mean -- go bearish on the sector as a whole? Sure. People are entitled to their opinions, and as recently as Tuesday, market research shop Gartner warned that the slump in semiconductors "will last longer than past ones, spark big layoffs and result in many buyouts of weaker players by stronger ones in the coming year." So there's plenty of reason to be down on the sector in general.
But isn't Intel precisely one of those "stronger ones" that will survive and thrive?
Buy the numbers
To this Fool's eye, that's precisely what Intel is. The company boasts a rock-solid balance sheet stacked with nearly $10 billion in net cash. And, it's generating free cash flow at the rate of nearly $8.4 billion per year.
With analysts projecting better than 12% annual profits growth for Intel over the long term -- emphasis on long, as opposed to Gartner's "coming year" -- and Intel selling for just 8.3 times its free cash flow (once you net out the company's cash stash), Intel looks to me like the very definition of a dirt cheap dream stock.
Can you dig it?
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