Intel Corp (INTC)

[VeeCee]

Goldman raises its ugly head again
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Goldman Sachs maintained a Sell rating on Intel (NASDAQ: INTC) with a price target of $16.00. In addition to concerns about excess supply, analyst James Covello thinks a rise in depreciation creates long term margin risk.
"Given our view that Intel's stock price is highly correlated to gross margin, we see downside risk for the shares," said Covello.
"While much of the recent discussion regarding Intel's gross margin has centered around declining ASPs and mix shift, we believe investors also need to consider Intel s rising depreciation expense. We expect Intel's depreciation expense will continue to rise over the next several years as Intel's capex has increased to $10-$11 bn per year since 2011, yet we forecast depreciation will only be about $6.9 bn in 2013. We estimate the future increase in depreciation expense will be an incremental 200-600 bp headwind to Intel's gross margin," he added.