Paul, I find "66" bad (loved 69), but what are markets thinking about?
Here some comments from "MS Investor":
In the glow of Tuesday's hat trick of three standard-setting closes, Al Goldman, chief market strategist at A.G. Edwards, said disappointing profits from Intel would not have a long-lasting impact on tech stocks in general.
"If they came in with 65 cents, there'd be a little pressure on high-techs tomorrow, and then they'd go up again," Goldman said prior to the report hitting the tape. "Asia is over and people are looking beyond to better times ahead. There's another possible two quarters of bad times ahead for technology, but the market looks nine months ahead."
Still, the numbers from Intel were clearly disappointing. Earnings per share at the chip colossus totaled 66 cents per share in the second quarter, 2 cents shy of expectations and well below "whisper" numbers, which had been quoted as high as 73 cents per share. In addition, the second-quarter results were down 8% from the prior quarter and 28% below year-ago levels.
Additionally, Intel said its gross margin fell to 49% from 54% in the first quarter, which it attributed to higher-than-normal inventory write-downs. Additionally, the firm said volume of units shipped in the quarter declined "slightly," although company executives expressed pleasure that high-end processors now account for more than 50% of unit volumes shipped.
Looking ahead, the outlook wasn't as rosy as many had been hoping for. The company said it expects third-quarter revenue to be flat compared to second-quarter results of $5.9 billion. Currently, First Call consensus for Intel's third quarter is 76 cents per share and the guidance suggests it will not meet that projection. However, Intel said it expects revenues and gross margins for the entire second half to exceed the first-half totals.
After falling 1 11/16 to 80 11/16 Tuesday ahead of the report, Intel shares were quoted down at about 79 3/16 in after-hours trading.
The company's conference call with analysts after the report was mainly free of acrimony. Most questions focused on the company's plans for its newest high-end chip, the Xeon. However, one analyst expressed displeasure and confusion regarding how Intel could continue to blame its declining earnings on an inventory correction at major PC manufacturers.
In reply, Paul Otellini, Intel's executive vice president and general manager said: "We've got ongoing pressure downstream of us in terms of manufacturers and distributors looking to consistently improve inventory and production models. It's an ongoing process, not an event, [and] I don't know that we're done yet. But there's a number of significant improvements happening and you'll hear that as OEMs come out with their reports in the coming weeks."
Some observers said that statement could portend positive news Wednesday from Compaq Computer (CPQ), which releases its second-quarter profits. The world's largest PC maker is only expected to report break-even results for the period, but better-than-expected news on its inventory channel could reignite the tech sector. Compaq Computer shares rose 1 1/16 to 33 11/16 Tuesday.
Marc Klee, manager of the John Hancock Global Tech Fund, said Otellini's comment on inventories was one of a few "quasi-upbeat" lines he heard on Intel's call, which he said left him "not unhappy, but not jumping for joy."
Klee, whose fund is long Intel but does not have a "huge position" in the stock, said Intel shares would have probably fallen Wednesday regardless of the earnings, "because of the run-up it had" ahead of the report.
Still, the fund manager noted that Intel wrote down about 2 points of gross margin due to higher-than-normal inventory write-offs. That, he said, shaved about 3 cents off its earnings per share.
"If they'd reported 69 cents, people would have been reasonably pleased," Klee said. "I'm not suggesting the stock would explode at 69 cents, but I was not unhappy with the quarter and I think things will get better."
So far "MS Investor".
I would add:
Let Intel gain about $3 in 1998 - that would produce a stock-price in a range of $60-$90, calculated with a P/E between 20 and 30. That means, Intel is fairly valuated in the mid 70th.
I mean, the majority of investors want to see the numbers of Compaq (today), Microsoft (Thursday) Dell (Friday?) before they adjust their portfolio.
So every chicken (am I chicken?) could sell tomorrow without too big loss compared to yesterdays hights.
I remember VERY bullish comments of Micheal Dell in the mid of June. So I'll bet the way Al Goldman does that - after some struggle this week - markets will bet on new records in the PC-sector (and that's becoming more and more the hole computer-business) if (and only if) Dell will continue presenting positive surprises.
The risk is (IMHO) that we could find no buyers. (who of us would buy in this situation) Thus the amount of sellers defines how far Intel will slide.
Whatever will happen - it's interesting!
Happy trading!
Jury |
