UBS Issues Big Downgrades on Intel, Hewlett-Packard (INTC, HPQ)

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Analysts at UBS late Tuesday issued a couple of downgrades to major tech players Intel Corporation ( INTC ) and Hewlett-Packard ( HPQ ) .

The firm slashed its rating in INTC from "Buy" to "Neutral," while cutting its price target from $28 all the way down to $19.50. That new target represents a small expected upside of 8% to Intel's Tuesday closing price of $18.12.

A UBS analyst gave the following reasons for the downgrade: "1) near-term PC demand is weak while the 4Q outlook remains cautious, 2) to stimulate 4Q demand, Intel's customers expect at least a 15% price reduction for mainstream processors on top of the ~50% cut to the high-end Core i7 prices already implemented by Intel, 3) Intel will see pressure on its gross margin, a key driver of Intel's shares."

As for HP, On HP, the firm also lowered its rating from "Buy" to "Neutral," and cut its price target from $54 to $44. That new target represents an expected upside of 10% from the stock's Tuesday closing price of $39.92.

An analyst commented, "… checks indicating weaker than expected consumer PC mkt & more aggressive pricing, as well as higher integration/M&A risk, some strategic uncertainty with a CEO change, & need for higher tablet/smartphone investments. Though valuation at 8.3x our revised FY11 EPS is not challenging, we see limited catalysts to materially move shares upward."

Intel shares were mostly flat in premarket trading Wednesday, while HP shares fell 24 cents, or -0.6%.

The Bottom Line
Shares of INTC have a 3.48% dividend yield, based on last night's closing stock price of $18.12.
Shares of HPQ have a .80% dividend yield, based on last night's closing stock price of $39.92.

Intel Corporation ( INTC ) is not recommended at this time, holding a DARS™ Rating of 3.4 out of 5 stars. Hewlett-Packard Company ( HPQ ) is also not recommended, with a DARS™ Rating of 3.3 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks , as well as a detailed explanation of our ratings system here .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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This article appears in: Investing Stocks
Referenced Stocks: HPQ , INTC

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