The Ratings Game: Intel stock has fallen enough, Morgan Stanley says in upgrade

by | Feb 23, 2023 | Stock Market

Intel Corp.’s dividend cut helped earn the stock an upgrade Thursday, as Morgan Stanley now sees “limited downside” for the beaten-down name. Morgan Stanley’s Joseph Moore bumped his rating on Intel’s stock up to equal weight from underweight Thursday, writing that while Intel’s
move to slash the dividend may lead to “some incremental selling in the coming weeks” due to the thresholds that some income funds may have, the decision gets a “negative catalyst out of the way.”

Moore also cited the stock’s “material underperformance” so far this year. Shares are off 3% to start 2023, while the PHLX Semiconductor Index
is up 16%. See more: Intel cuts dividend by 66% in ‘inevitable’ move that was once ‘unthinkable’ In Moore’s view, Intel’s prior dividend yield of about 6% “kept dividend investors involved unsustainably,” whereas the new yield of about 2% “is both more in-line with the peer group and more supportive of the company’s multi-year capital-spending strategy” as the company plans hefty foundry spending going forward. “We have long said that we would prefer to see Intel as a value stock with optionality for a turnaround in the core business, but that the ramp of fixed costs created too much risk for cash-flow degradation,” Moore wrote. The company’s plans to cut the dividend and other costs signal “a management team that is now working to return to a more disciplined approach with regards to capital management and allocation.” Moore added that he expects Intel’s business to come under addition …

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