JMP Securities Turns Bearish On Intel

Alex Gauna of JMP Securities on Tuesday downgraded Intel Corporation INTC to Market Underperform from Market Perform, while establishing a $30 price target following the firm's industry sources revealing there exists a sharp reduction in server activity heading into 2015.

"Our source is another supplier of components into server platforms, and while it is possible this is a timing and/or temporary anomaly, we believe current elevated valuation levels are not capable of absorbing such a setback," Gauna wrote. The analyst adds that this is even more concerning "given the unusual slowdown at this early stage in the Grantley upgrade cycle, the breadth and magnitude of the momentum change, and the risk of excess inventory overhang following the abnormally strong 11 percent quarter over quarter and 25 percent year over year growth that Intel reported for Data Center revenues last quarter."

Gauna also notes that, Global Foundries, Samsung and TSM had secured orders for the next generation of Apple based on FinFET technology, which intensifies and broadens the competitive landscape.

Finally, the analyst states that Intel's gross margins of 65 percent or better over the past two quarters are at the high end of historic norms and above the company's target range. With a weakness in servers, Gauna believes that the company's gross margins have peaked and are likely to contract.