Why Intel Stock (INTC) Is Down Today and Why Big Banks Aren’t Buying the Dip

After nearly doubling in just a month, Intel (NASDAQ:INTC) stock is finally hitting some turbulence, tumbling 9% in Tuesday’s trading session after a KeyBanc report showed April notebook shipments declined 27% month-over-month. Because Intel still generates a meaningful portion of its business from PCs and client computing, the data appeared to give investors a reason to lock in profits following the company’s massive rally tied to optimism surrounding a potential Apple foundry partnership.

That’s exactly why some of Wall Street’s biggest banks are not rushing to recommend buying the dip.

Deutsche Bank analyst Ross Seymore acknowledged that reports surrounding Intel’s foundry business gaining traction have created a “strong tailwind” for the stock lately, particularly speculation surrounding a potential partnership with Apple. Still, Seymore believes investors may already be pricing in much of that optimism. While the analyst sees front-end wafer manufacturing deals as especially meaningful due to what they could say about Intel fixing its manufacturing process, he ultimately argued that the “potential good news is more than adequately reflected” in the current share price.

To this end, Deutsche Bank assigns INTC shares a Hold (i.e., Neutral) rating on the stock and a $100 price target that implies about 16% downside from here. (To watch Seymore’s track record, click here)

A similar tone came from analyst Vivek Arya at Bank of America. Arya acknowledged that manufacturing chips for Apple could represent a sizeable long-term opportunity for Intel’s foundry business, particularly given Apple’s enormous semiconductor demand. However, the analyst cautioned that the discussions still lack clarity and stressed that Bank of America is “not incorporating the potential Apple deal” into its model yet.

More importantly, Arya argued that these possible upside scenarios already appear “fully valued” in Intel shares, which is why the banking giant reiterated its Underperform (i.e., Sell) rating, while its $96 price target on INTC implies ~18% downside from current levels. (To watch Arya’s track record, click here)

Morgan Stanley analyst Joseph Moore also struck a cautious tone, arguing that Intel’s recent rally has not materially changed the firm’s broader view on the stock. Moore acknowledged several encouraging developments, including Intel’s aggressive cost cutting, more disciplined capital spending, renewed focus on products, and partnerships such as the company’s collaboration with Nvidia. However, the analyst suggested investors may be getting too optimistic about Intel’s foundry ambitions, noting that bulls “immediately assume” many of these announcements will translate into foundry-related upside. Moore ultimately argued that Morgan Stanley still sees “better risk reward” elsewhere in semiconductors, particularly in memory stocks, adding that the firm simply does not “have that conviction for Intel at these levels.”

That caution is also reflected in Morgan Stanley’s valuation outlook. The firm currently rates Intel shares Equal-weight, though its $73 price target suggests the recent rally could cool off in a big way, implying ~37% downside from current levels. (To watch Moore’s track record, click here)

Overall, Wall Street appears far less enthusiastic than Intel’s recent rally might suggest. According to TipRanks, Intel currently carries a Hold consensus rating based on 38 analyst reviews, with 11 Buys, 24 Holds, and 3 Sell ratings. More tellingly, the average 12-month price target sits at $82.70, implying nearly 29% downside from current levels. (See INTC stock forecast)

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.