Why Goldman Sachs Just Dropped A Huge SELL Rating On Intel

intel paul otellini

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The most dramatic call you’ll see today: A big fat SELL rating on Intel from Goldman Sachs.A blue chip firm putting such a negative rating on a blue chip stock that’s been doing great always deserves some attention.

Here are the key points behind the rating from Goldman’s James Covello:

  • The 22% M/M growth in the stock post-earnings is way out of line.
  • Processor shipments are going to slow over the course of the year, in part because processors have been outselling PCS, and thus there’s a catch-up effect.
  • Due to average selling price declines and excess capacity, 2012 sales will be flat.
  • Increased competition from ARM-based processors in tablets will also hit the company.

In a related note, Goldman also has bearish commentary on the rest of the semiconductor industry:

  • Inventory at all notebook makers are growing.
  • 2010-2012 period is seeing huge capacity increases for the whole industry that will lead to oversupply.
  • During past cycles, equipment orders declined in each of the past two quarters following the cyclical peak.

The firm also downgraded KLA to Sell and Applied Materials to Neutral.

For more on the big news happening this morning see here >