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Pro Analysis

Intel shares downgraded on concern profit margin may decline

Intel employees walk by a sign as they enter their office in Santa Clara, California.
Justin Sullivan | Getty Images
Intel employees walk by a sign as they enter their office in Santa Clara, California.

Canaccord Genuity on Friday downgraded Intel to hold from buy given the potential for margins to compress as the chipmaker ventures into new markets to seek growth.

"We agree with management's long-term decision to invest for growth; however, turning a battleship like Intel takes time and we believe other stocks we cover will generate more attractive returns during this period of prolonged transition …," equity analyst Matthew Ramsay wrote in a research note.

He says Intel is likely to get "caught between the proverbial rock and a hard place" as the firm tries to overcome "peak" PC margins and margin compression in its data center group (DCG).

"We concede Intel shares generate a strong yield and remain inexpensive, but we believe shares could remain range bound as margins stagnate and until investors see proof of new investments …," he said.