Intel Hit with Another Downgrade on Production Issues

Shares of semiconductor company Intel Corp. (INTC) are down another 1.5% as of Tuesday afternoon on a downbeat note from one team of analysts who flagged a major "strategic problem" in the delayed manufacturing of its next-generation chip processing technology.

(See also: AMD Could Triple Market Share on Intel Issues.)

Headwinds to Hurt Intel's Long-Term Growth Expectations and Bottom Line

In a note to clients on Tuesday, analysts at Raymond James recommended selling shares of the Santa Clara, Calif.-based chip maker, writing that investors shouldn't expect the firm to ramp up its 10-nanometer production for another two years, as reported by CNBC

Raymond James analyst Chris Caso, who lowered his rating on Intel stock from underperform to market perform, expects "a number of headwinds mounting against the company, set to impact longer-term growth expectations and profitability."

In July, Intel announced that its 10nm chips would release for the holiday season 2019. Meanwhile, Advanced Micro Devices Inc. (AMD) is slated to launch a quicker and more efficient 7nm chip manufactured by Taiwan Semiconductor (TSM) next year. 

"While Intel is standing still, TSMC isn't, so by the time Intel has 10nm in server we expect TSMC to be firmly in the lead," wrote Caso.

Trading at $46.21, INTC reflects a modest 0.1% return year-to-date (YTD), compared to the S&P 500's 9.3% gain over the same period. 

As for the broader semiconductor sector, Caso has a more bearish view following a week spent in Asia speaking with chip supply chain companies.

"Based on the data we collected, we have concluded that we have entered a cyclical downturn, and are downgrading the semiconductor group... We've seen this movie before, and what's happening now is consistent with a cyclical semiconductor industry downturn," wrote the Raymond James analyst.

Caso also cut his rating on Analog Devices Inc. (ADI), Microchip Technology Inc. (MCHP) and ON Semiconductor Corp. (ON) from outperform to market perform. 

(For more, see also: Intel’s Chip Lead Is ‘Disappearing’.)

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