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One of the great truths of trading is that analysts can hurt you over the short term. Just ask anyone who owns shares of Intel (Nasdaq: INTC). The stock had been off as much as 3.5% on an up market day, thanks to a Nomura Securities downgrade.
Analyst Romit Shah has good reasons for liking Intel less today. The chipmaker reduced its forecast for full-year PC shipment growth -- from the low double digits to 8%-10% -- and authorized $300 million in new capital spending. Less demand, more cost. Not good, right?
No, but the story also isn't that simple. Intel CEO Paul Otellini said in a Bloomberg interview that reduced PC demand wouldn't dampen revenue growth since the hit would come at the lowest end of the market, where Intel's Atom chip competes with low-power designs from ARM Holdings (Nasdaq: ARMH) and MIPS Technologies (Nasdaq: MIPS).
Diversification is key to Intel's stock story, as Otellini tells it. During yesterday's call with analysts, he pointed to a 38% increase in microprocessors for storage devices and a 40% increase in revenue from data-networking customers. Data-center clients are also increasingly relying on Intel-powered servers, Otellini told Bloomberg.
But don't tell that to traders. To them, Intel and Microsoft (Nasdaq: MSFT) are the PC business. And if the PC business is slowly giving way to tablets, smartphones, and single-purpose cloud laptops such as Google's (Nasdaq: GOOG) Chromebook, "Wintel" will pay a dear price. Otellini would say otherwise, but I want to know what you think.
Will you buy Intel shares today? Please vote in the poll below, and then leave a comment to tell us whether you think Nomura's assessment of Intel is fair. You can also add Intel to your watchlist for up-to-date analysis on the stock as soon as it's published.
