Intel: Barclays Cuts to Hold, Sees ‘Pause’ in Shares

I noted earlier some upbeat responses to SIA November chip date, but one analyst had a more extreme reaction.

Barclays Capital’s CJ Muse today cut his rating on Intel (INTC) shares to Equal Weight from Overweight in response to the data.

Chip revenue may not rise at all in 2012, or it could be up as much as 4%, which is worse than Muse’s prior view for a 2% to 5% rise this year.

He thinks overall that 2012 will be okay, with recovery in the latter part of the year:

We maintain our 1-Positive rating on the semiconductor industry, with the vision that the recovery will be more of a 2H12 story, led by a trough in 1Q12 and depleted inventories (we believe semis will be under-shipping end demand throughout 4Q and into 1Q) that will lead to outperformance in topline growth relative to end market customers beginning in the 2Q/3Q timeframe.

Muse thinks “stock selection” will be key. His top large cap picks for this year are Qualcomm (QCOM), Broadcom (BRCM), and Altera (ALTR), with Micron Technology (MU) and Skyworks Solutions (SWKS) and Atmel (ATML) his top mid-caps. His thinking is that “advanced logic and NAND flash” memory chips will lead the rise in orders in the latter part of the year.

As regards Intel, Muse is generally upbeat about the company’s prospects for its “Romley” server chip, for the “ultrabook” laptop program the company is promoting, and for Intel’s prospects for mobility. But The hard-disk drive issue will continue to weigh on the shares, causing a “pause” in the stock, he thinks.”

We are moving to the sidelines on Intel, as we see potential headwinds in the company�s core PC business in 1H12. With HDD shortages likely impacting 1H12 PC demand, coupled with expectations that we could see a slip in consumer end demand into Win 8 launch in 3Q/4Q12, we think Intel will probably need to lower its utilization rates in 1H12, thereby likely weighing on GM and EPS estimates and thus driving below-consensus results. [We remain] remain firm in our belief that Intel is the best at chip manufacturing in the world and that this gives the company a shot at some success in mobility starting in 2013.

Muse cut his estimate for Intel’s 2012 revenue to $54.07 billion from a prior $55.22 billion, while cutting his EPS estimate to $2.32 per share from $2.45 previously.

Intel shares today are up 44 cents, almost 2%, at $24.69.