While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.
What: Shares of Intel Corporation (NASDAQ:INTC) had a sluggish morning after RBC Capital Markets downgraded the chip giant from "Outperform" to "Sector Perform."
So what: Along with the downgrade, analyst Doug Freedman lowered his price target to $26 (from $27), representing about 10% worth of upside to yesterday's close. While contrarian traders might be attracted to the stock's recent slide, Freedman believes that the near-term potential remains limited given his view that Intel's big mobile spending won't pay off for a few more years.
Now what: RBC remains uncertain about how Intel's mobile efforts will translate into actual revenue and profit leverage. "After the Q3 earnings call, we believed Intel would lay out a case for improving operating margins at its analyst day, but this did not transpire," noted RBC. "Instead, the 2014 outlook was uninspiring, while Intel is in our view unwisely chasing/spending aggressively in new mobile initiatives that are going to be a drag on operating margins in the years to come." Given Intel's still-dominant scale and near-4% dividend yield, however, RBC's mobile concerns might be providing patient Fools with a juicy long-term income opportunity.
Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.