Chip stocks have been in a steady decline over the last five months and we may have finally found out why: UBS cut Intel to neutral late Tuesday night because of slowing growth in the pc market.
Uche Orji, the analyst who made the call, said the only way to stimulate pc demand going forward is for component prices to come down. He thinks Intel's gross margins, which had been growing steadily to 6 percent in the second-quarter, will start to flatline and then head lower. Because Intel tends to trade on gross margins, Orji thinks the component prices will need to fall.
If component prices fall, Intel can start to promote its products more. They were unable to do so earlier and had poor back-to-school sales, he said.
Orji noted that while corporate demand for Intel's products has been good, it accounts for one-third of their business. Consumers, however, account for 65 percent of their revenue. He thinks Intel's corporate customers will help, but is more reliant on the consumer.
UBS also cut Hewlett-Packard for the same reasons Tuesday.
Watch the video to see the full interview with Orji.
What's the Trade?
Steve Cortes, founder of Veracruz, is frustrated that a sell-side analyst would come out and downgrade a stock that has done this poorly.
Intel is trading at 17 times earnings right now, but four months ago, it was 50 percent higher. He thinks this would be very useful information when it was trading at 24 times earnings, but not as much now at 17.
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CALL TO THE FLOOR: BUFFALO WILD WINGS
Call it the 'table-gating trade.'
After a steep fall earlier in the year, shares of Buffalo Wild Wings rebounded just as the NFL season kicks off Thursday. Speaking on Wednesday's "Fast Money Halftime Report," CEO Sally Smith said the start to football season brings great opportunities for strong crowds through April. Football leads into baseball playoffs, the NBA, then the Super Bowl and finally March Madness.
If you can't be at the game, be at the restaurant, said Smith. The high cost of being at the stadium and the rise of a frugal consumer has helped Buffalo Wild Wings, she said. To enhance the customer's experience, they've upgraded to HD and plasma televisions and subscribe to the NFL ticket, which allows you to watch games that wouldn't normally be broadcast in your area.
CNBC's Melissa Lee asked how food prices might affect business. Smith said wing prices have fallen since the highs of 2009 and early 2010. They're not at a "more normal level," she said. The restaurant chain doesn't contract wing prices, but have managed wing costs for more than 25 years and will continue to do that. Smith said they are, however, looking to improve margins by contracting food costs where they can.
Watch the video to see the full interview with Smith.
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CALL THE CLOSE
Peter Schiff, Euro Pacific Capital president and former US Senate candidate, recommends sticking with gold and silver.
"Risk on," said Joe Terranova, chief market strategist of Virtus Investment Partners.
Brian Kellly, founder of Kanundrum Capital, thinks the market could go down when President Obama outlines his plan for the economy Wednesday.
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Trader disclosure: On Sept. 8, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Terranova Owns (AXP), (APA), (AAPL), (ARUN), (BMO), (C), (FCX), (XBI), (GS), (IBM), (JOYG), (MRVL), (OXY), (ORCL), (POT), (QCOM), (GLD), (RSH), (SU), (UPL), (X); Cortes Owns (FCX), (BHP), (SFD), (BMO), (TD), (OAS); Cortes Is Long British Pound; Cortes Is Long Crude Oil; Cortes Is Short Yen
For Peter Schiff
Schiff And His Firm Own (BP)
Schiff And His Firm Own (XOM)
Schiff And His Firm Own (CVX)
Schiff And His Firm Own (COP)
Schiff And His Firm Own (POT)
Schiff And His Firm Own Gold
Schiff And His Firm Own Silver
Schiff And His Firm Own U.S. Dollar, Euro, Swiss Franc, Yen
For Brian Kelly
Accounts Managed By Kanundrum Cpaital Own (GLD)
Accounts Managed By Kanundrum Cpaital Own (GDXJ)
Accounts Managed By Kanundrum Cpaital Own (SLV)
Accounts Managed By Kanundrum Cpaital Own (VRSN)
Accounts Managed By Kanundrum Cpaital Own (RAX)
Accounts Managed By Kanundrum Cpaital Own (DRIV)
Accounts Managed By Kanundrum Cpaital Own (ANDE)
Accounts Managed By Kanundrum Cpaital Own (TBT)
Accounts Managed By Kanundrum Cpaital Own (POT)
Accounts Managed By Kanundrum Cpaital Are Long U.S. Dollar
Accounts Managed By Kanundrum Cpaital Are Long Swiss Franc
Accounts Managed By Kanundrum Cpaital Are Long Yen
Accounts Managed By Kanundrum Cpaital Are Short (XLF)
Accounts Managed By Kanundrum Cpaital Are Short (IAI)
Accounts Managed By Kanundrum Cpaital Are Short (MCO)
Accounts Managed By Kanundrum Cpaital Are Short (AFL)
Accounts Managed By Kanundrum Cpaital Are Short Pound
Accounts Managed By Kanundrum Cpaital Are Short Australian Dollar
Accounts Managed By Kanundrum Cpaital Are Short Euro
For Joe Terranova
Terranova is chief market strategist of Virtus Investment Partners, LTD.
Virtus Investment Partners own more than 1% of (ABAX)
Virtus Investment Partners own more than 1% of (ALK)
Virtus Investment Partners own more than 1% of (AMKR)
Virtus Investment Partners own more than 1% of (CASS)
Virtus Investment Partners own more than 1% of (CSVI)
Virtus Investment Partners own more than 1% of (IGE)
Virtus Investment Partners own more than 1% of (LDR)
Virtus Investment Partners own more than 1% of (LPHI)
Virtus Investment Partners own more than 1% of (MGRC)
Virtus Investment Partners own more than 1% of (NRCI)
Virtus Investment Partners own more than 1% of (DBV)
Virtus Investment Partners own more than 1% of (XLB)
Virtus Investment Partners own more than 1% of (XLP)
Virtus Investment Partners own more than 1% of (XLY)
Virtus Investment Partners own more than 1% of (XLF)
Virtus Investment Partners own more than 1% of (XLI)
Virtus Investment Partners own more than 1% of (XLU)
Virtus Investment Partners own more than 1% of (SUBK)
Virtus Investment Partners own more than 1% of (WDFC)
Virtus Investment Partners own more than 1% of (YDNT)
Virtus Investment Partners own more than 1% of (DLUEY)
Virtus Investment Partners own more than 1% of (DRYS)
For Uche Orji
Orji Or A Member Of His Team Owns (INTC)
(INTC) Is Or In Past 12 Months Has Been a Client Of UBS Securities LLC (Non-Investment Banking Securities-Related Services)
UBS Securities LLC Has Received Compensation From (INTC) In Past 12 Months
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