Intel (INTC) stock is trading lower in premarket action after Top Citi analyst Christopher Danely downgraded the shares to Sell from Neutral, even as he raised his price target to $29 from $24 per share. The downgrade follows Thursday’s big rally, when Intel surged nearly 23% after announcing that Nvidia (NVDA) would invest $5 billion for a 4% stake and partner with the company to develop new data center and PC chips.
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In his note, the 4.5-star analyst said Intel shares have already rallied close to 50% in recent weeks on hopes that Nvidia’s involvement will mark a turning point for Intel’s foundry business. However, he disagrees. The analyst argued that the stock is already pricing in foundry success, which he sees as highly unlikely.
Why Danely Downgrades Intel Stock
Danely warned that Intel’s foundry unit is unlikely to compete effectively with Taiwan Semiconductor Manufacturing (TSM) and other established players. While the Nvidia partnership may give Intel a short-term boost, he argued that it will not be able to fix the deeper problems in Intel’s manufacturing business, which he believes has only a slim chance of success.
Citi’s downgrade was based primarily on valuation. Danely said Intel’s rally has pushed the stock to levels that assume its turnaround is already complete. Since success in the foundry business is still uncertain, he sees more risk than reward at this price.
It is worth noting that Danely ranks 775 out of more than 10,026 analysts tracked by TipRanks. He has a success rate of 63%, with an average return per rating of 11.3% over a one-year timeframe.
Is Intel a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on INTC stock based on one Buy, 26 Holds, and three Sells assigned in the past three months, as indicated by the graphic below. After a 44.6% rally in its share price over the past year, the average INTC price target of $23.61 per share implies 22.77% downside risk.
