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Intel Slumps on Analyst's Forecast

September 06, 2000|Bloomberg News

Controversial analyst Ashok Kumar took aim at Intel Corp. stock Tuesday, and succeeded in helping to wipe out about $31 billion of market value.

The company's shares (ticker symbol: INTC) slumped $4.69, or 6.3%, to $69.25 after Kumar, a tech analyst at U.S. Bancorp Piper Jaffray, said near-term sales growth at the world's biggest computer-chip maker could fall short of forecasts.

Trading was heavy: More than 58 million shares changed hands.

Kumar, who often has opinions that run contrary to the conventional wisdom of many of his peers, said chip demand has slowed, and that the recovery that usually comes with the back-to-school season hasn't materialized yet.

Pricing pressures "could turn malignant" as the supply of chips for personal computers increases, and Intel's costs will rise as it starts volume production of the powerful Pentium 4, Kumar said.

The sluggish demand also will hurt sales at PC makers this quarter, Kumar wrote. That helped drag Gateway (GTW) down $4.71 to $63.97 and Compaq (CPQ) down $1.38 to $32.25. Yet many other chip stocks held up relatively well. The SOX chip-stock index fell 1.8%, much less than Intel's loss.

Kumar didn't exactly suggest bailing out of Intel stock: Indeed, his rating downgrade was merely to "buy" from "strong buy." But he said he expects the stock to fall to the $60 range. The stock last week hit a record high of $75.81.

Investors have reason to take note of Kumar's forecasts: On Aug. 2, he cut his rating on Dell Computer (DELL) to "buy" from "strong buy," saying the No. 1 direct seller of PCs might miss sales-growth forecasts. Dell shares fell 4.8% that day. The next week, the company reported second-quarter sales that trailed expectations.

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A Good Year--So Far

Shares of Intel Corp. tumbled Tuesday after an analyst warned of near-term sales weakness, but the stock still is up 68% year-to-date--and hit a record high Thursday.

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Weekly closes and latest on Nasdaq

Tuesday: $69.25, down $4.69

Source: Bloomberg News

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