All, following is from today's Heard On The Street (WSJ):
12/12/96 Heard On Street: Intel Shares Are Soaring
By Susan Pulliam
Staff Reporter of The Wall Street Journal
If you thought all of the good news about computer chips was already out there and then some, think again.
Shares of Intel soared yesterday even amid the market's sell-off, closing up 7 3/4 at 136 7/8 on volume of 21 million shares after Wall Street analysts, including those at Merrill Lynch, First Boston and Montgomery Securities, sharply boosted their earnings estimates for 1997.
Why the excitement?
Well, it hasn't hurt that Intel executives have been visiting in recent days with investment pros and analysts, with upbeat comments about demand for the company's microprocessors as well as profit margins. Yesterday, for instance, Gerald Parker, executive vice president of manufacturing, spoke at a Montgomery Securities conference, saying Intel plans to boost capacity 10% next year.
"They're starting to speak at conferences and to investors, and it's becoming clear that November was good and December is turning out to be great. You're going to see analysts continue to move up their estimates over the next month," says Dan Niles of Robertson, Stephens & Co., who on Monday raised his Intel earnings estimate for next year to $8.10 a share from his previous estimate of $7.25.
Merrill Lynch analyst Thomas Kurlak yesterday raised his per-share Intel estimate for 1997 to $9 a share from $7.70 after meeting with Intel executives Tuesday. Mr. Kurlak believes demand, especially among corporate customers, is so strong that Intel's per-share net income could rise 64% next year, compared with the 36% increase Wall Street is currently expecting for 1996. He expects Intel will earn $5.50 a share this year.
"Management says they're sold out for all microprocessors for first-quarter delivery," says Mr. Kurlak. That, he says, means that Intel is unlikely to experience the seasonal downturn in shipments that normally shows up between the fourth and first quarters each year. As a result, both the fourth-quarter and first-quarter earnings outlook is brighter. First Boston boosted its 1997 estimate to $8.20 a share from $7.80, while Montgomery bumped its estimate to $8.85 from $8.05.
The new Intel forecast is just the kind of news that momentum investors like to hear. "Earnings-per-share estimates have been going up, and we're still in a momentum environment, so people are scrambling to get in," says Larry Marx, co-manager of Neuberger & Berman's Guardian Fund. Mr. Marx has owned Intel for some time but says he wasn't "smart enough to buy more" after the summer, when Intel's shares began rising to their current level from around 70.
Indeed, the fresh hopes for Intel's margins and earnings are a big improvement on the modest increase in the earnings growth rate that Wall Street previously thought Intel would report next year. Intel's shares hit a 52-week low just under 50 late last year when retail buying of personal computers wasn't as robust as expected, leaving the distribution channel for Intel's microprocessors stuffed for several quarters. "Everyone assumed Christmas demand in 1995 would be very strong. But it turned out it was only `strong,' instead of `very strong' and there was excess inventory throughout the industry. It took three quarters to burn that off," says Needham & Co.'s Hans Mosesmann.
Some investors may be Skeptical about the enthusiasm, especially those who remember when the hoopla faded in last year's fourth quarter, when Intel and other tech stocks fell as it became clear that inventory channels were stuffed with personal computers.
Says one trader: "Last year, people were way out of line. Now they think there's no possibility of disappointment. But I don't think these new estimates are way out of line at the moment -- not yet, anyway." And analysts insist this year is different, chiefly because the demand is coming from corporate customers who are upgrading their personal-computer systems, rather than retail customers. "Despite a slow retail market, there was a pickup in corporate demand after Thanksgiving," says Needham's Mr. Mosesmann. And the corporate market, he says, represents a much bigger base, representing 75% of world-wide personal-computer demand.
Another bonus: Intel is expected to roll out new products next year that could stimulate retail demand, says Robert Chaplinsky, an analyst at Hambrecht & Quist. Intel is introducing a multimedia chip that will allow users to run video and sound programs as much as four times faster than existing generations. In addition, it is coming out with a chip that will allow personal-computer users to create three-dimensional graphics.
(END) DOW JONES NEWS 12-12-96
6 19 AM
FWIW,
John |
