Intel's stock ranks dead last in the chip sector by this measure

By Emily Bary and Philip van Doorn

Other major players that are out of favor include Texas Instruments and Skyworks

Earlier this week we listed 13 stocks of semiconductor manufacturers and makers of related equipment that were most favored by analysts. Today, we are screening again - this time, focusing on the companies that are least favored in the space.

Here are links to the previous two articles in this series:

Semiconductor stocks most favored by analysts Chip makers expected to increase revenue most rapidly from 2024 through 2026

When taking a top-down look at a large group of U.S.-listed stocks, it is clear that sell-side analysts (those who work for brokerage firms or independent equity research shops) shy away from outright "sell" or equivalent ratings. This is because an analyst is likely to conclude that competitive pressure on a company or a sudden negative event has already been reflected in a lower share price. A neutral rating is likely to be assigned.

Among companies in the S&P 500 SPX, there are 260 whose stocks have majority "buy" or equivalent ratings among analysts polled by FactSet. In case you are wondering, Amazon.com Inc. (AMZN) and Microsoft Corp. (MSFT) top the list - each has 95% "buy" ratings. Amazon is covered by 64 analysts polled by FactSet and Microsoft is covered by 59 analysts.

Now take a guess: How many stocks in the S&P 500 have majority "sell" ratings?

The answer is zero. The one with the highest percentage of "sell" or equivalent ratings is Franklin Resources Inc. (BEN), with 44%. Next is Paramount Global (PARA), whose Class B shares have 36% "sell" ratings.

The least-favored semiconductor stocks

Once again, for this screen of the chip space, we began with a list of 61 companies. These include all 30 held by the iShares Semiconductor ETF SOXX, which tracks the performance of the PHLX Semiconductor Index SOX. We added 31 more companies in the S&P 1500 Composite Index XX:SP1500 within the semiconductor industry, as determined by FactSet, or in the Semiconductors and Semiconductor Equipment Global Industry Classification Standard group, as per companies' filings with the Securities and Exchange Commission. The S&P Composite 1500 Index is made up of the S&P 500, the S&P MidCap 400 Index MID and the S&P Small Cap 600 Index SML.

We pared the list to 54 companies covered by at least five analysts polled by FactSet. Among the remaining companies, 39 have majority "buy" or equivalent ratings.

These 10 semiconductor companies have the lowest percentages of "buy" or equivalent ratings:

   Company                           Ticker   Share "buy" ratings  Share neutral ratings  Share "sell" ratings  Sept. 18 price  Consensus price target  Implied 12-month upside potential 
   Intel Corp.                        INTC                     7%                    78%                   15%          $20.77                  $25.10                                21% 
   Diodes Inc.                        DIOD                    17%                    66%                   17%          $59.07                  $74.67                                26% 
   SolarEdge Technologies Inc.        SEDG                    17%                    74%                    9%          $21.69                  $30.16                                39% 
   Skyworks Solutions Inc.            SWKS                    21%                    72%                    7%          $96.23                 $116.76                                21% 
   Wolfspeed Inc.                     WOLF                    32%                    58%                   10%           $8.34                  $18.21                               118% 
   Qorvo Inc.                         QRVO                    32%                    57%                   11%          $99.80                 $126.26                                27% 
   Texas Instruments Inc.             TXN                     35%                    51%                   14%         $200.71                 $212.16                                 6% 
   Silicon Laboratories Inc.          SLAB                    36%                    55%                    9%         $110.79                 $139.00                                25% 
   IPG Photonics Corp.                IPGP                    42%                    41%                   17%          $68.92                  $84.67                                23% 
   Kulicke & Soffa Industries Inc.    KLIC                    43%                    57%                    0%          $40.91                  $51.00                                25% 
                                                                                                                                                                          Source: FactSet 

Click on the tickers for more about each company.

Click here for Tomi Kilgore's guide to the wealth of information available for free on the MarketWatch quote page.

The right-most column of the table shows the 12-month upside potential implied by the consensus price targets. But keep in mind that for Intel Corp. (INTC), for example, seven of the 36 analysts who have a neutral rating for the stock didn't provide price targets to FactSet. So the price targets might be skewed to the positive.

Intel's big move

When it comes to the analysts who follow Intel's stock, the bull camp has dwindled in recent months.

Even though neutral-rated analysts made up the majority of those following the stock as of the end of July, there were more bulls back then. As of July 31, 29% had buy ratings and 63% had neutral ratings, according to FactSet data. Now, only 7% of covering analysts hold buy ratings on Intel's stock.

Many bulls jumped ship in the wake of Intel's last earnings report, which came out in early August. Then, Intel announced it would be suspending its dividend and engaging in massive job cuts. Intel's forecast for the current quarter came in lower than expected, and the company is engaging in its dramatic restructuring as it deals with a variety of business challenges, including technological missteps that have eaten into its market share.

What's more, Intel makes central processing units, but graphics processing units such as those made by Nvidia Corp. (NVDA) have proven far more useful for artificial-intelligence applications.

Analysts with neutral ratings on Intel didn't move to more bullish stances earlier this week, after the company announced a plan to turn its foundry business into an independent subsidiary and said that it was expanding its relationship with Amazon Web Services.

"Intel isn't out of the woods yet but an endorsement from the world's biggest cloud, AWS, is a step in the right direction," Ben Reitzes of Melius Research wrote in a note to clients earlier this week.

Truist analyst William Stein described Intel's latest moves as "collectively in a positive light, but not positive enough to overcome what we see as deep challenges for the company."

Therese Poletti: Why Intel's latest move for its foundry business is so significant

Intel's stock was down 58.1% for 2024 through Wednesday, with dividends reinvested. That follows a 95% return in 2023 and a 47% decline in 2022. This chart shows total returns for Intel, SOXX and the S&P 500 for five years through Wednesday:

Other stocks that are short on love from analysts

Last week, we highlighted SolarEdge Technologies Inc. (SEDG) and Wolfspeed Inc. (WOLF) among semiconductor-industry companies that could see some of the fastest revenue growth through 2026, based on analyst projections. Despite those growth estimates, analysts are fairly hesitant to recommend the stocks: Only 17% have buy ratings on SolarEdge shares and only 32% have buy ratings on Wolfspeed.

For SolarEdge, which makes energy-technology products, Guggenheim's Joseph Osha worries about the company's capital position. "We don't see how the company can repay its coming September 2025 debt maturity without letting cash get dangerously low," he wrote Wednesday, while reiterating a neutral rating on the stock.

Back in August, TD Cowen's Joshua Buchalter took note of progress at Wolfspeed with the silicon-carbide company's 200-millimeter platform. "That said, we struggle with increasingly moving parts of the story, notably the change in manufacturing roadmap, liquidity/capital raise plans and tepid demand," he wrote, while sticking with a hold rating.

Texas Instruments Inc. (TXN) also commands a relatively low share of buy ratings, at 35%. The company's "cyclical position is better than most peers for a potential rebound," Buchalter wrote earlier this month. But his estimates for the fourth quarter and into 2025 are below the consensus view, "as we prefer to model more seasonal growth versus a sharp rebound until we see more evidence of demand improving." He rates the stock a hold.

Don't miss: How Microsoft's dividend hike and new $60 billion buyback program stack up

-Emily Bary -Philip van Doorn

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

09-19-24 0716ET

Copyright (c) 2024 Dow Jones & Company, Inc.