Bernstein Analyst Explains Why Intel Was Downgraded And P.T. Lowered A Day Before Its Q2 Earnings Release

Stacy Rasgon, Bernstein analyst, downgraded Intel Corporation INTC on Tuesday going into earnings on Wednesday to Underweight from Market Perform. Rasgon also lowered his price target on the stock to $25 from $29, above which the stock trades currently.

Rasgon was on CNBC recently to explain the reasons behind the downgrade and why he downgrade the stock a day before its earnings release.

The Timing

"I'll admit the timing of it is a little inopportune," Rasgon began. "I don't usually make a practice of moving targets around into a print. That being said, this is [a] second note in the week we have written on Intel. Last week we took our numbers down on weaker PCs which wasn't a shocker."

"At the same time, [that] we also highlighted a number of indicators that I would call somewhat circumstantial that suggested to [me] further deterioration could be happening -- layoffs, [weird] executive departure, a big expense at non-accretive deal, reports of process and product delays."

Not Circumstantial Anymore

He continued, "I did not take my rating down at that time because those were circumstantial data points. What happened since then is we got some information that may not be quite as circumstantial. Some signs that highlight the possibility of a disappointment in Intel's server business, the data centre business."

"That [...] last sort of leg standing on the [...] pieces on the stock. I think, there is a real chance of that disappointing now. That is enough to push me over the edge. Today we checked our numbers [...] cut our prospect for data centre, we took our target price down and we downgraded the stock," Rasgon concluded.