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Technology Stocks : Intel Corporation (INTC)
INTC 46.47-4.5%Jan 30 9:30 AM EST
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To: Burt Masnick who wrote (3341)9/16/1996 9:04:00 PM
From: Harry Landsiedel   of 186894
 
Nobody knows for sure all the reasons for the change, but here are some in my view:

1) Wall St lumped Intel with the semiconductors last years pushing the price up to 78 in July behind the higher demand for drams, i.e. they made no distinction between a branded chip like Intel and the commodity. That's why the price dropped to the mid-50's in December.

2) The market overestimated the growth in the PC market last year and bid up prices of Intel and MSFT. The pentium and Windows 95 made them overestimate 4th quarter demand. When Intel's 4th Qtr. results disappointed they creamed the stock in January.

3) The street has finally separated Intel from the Micron type commodity chips. I believe we have the May analysts meeting to partly thank for that.

4) The street has underestimated demand in the PC market this year not factoring in the lower prices caused by component price declines. The latest announcement by Intel confirms that demand is stronger and the market is reacting to this news.

5) The combination of finally seeing that Intel is a powerful brand with a franchise equal to Microsoft and higher PC demand is fundamentally altering the P/E. Intel's P/E in December/January was in the 11 range I believe. It is now approaching 19.

6) Investors are now starting to "pay" for 1997 earnings. Intel's earnings in 1996 were expected to be up about 16%, so the rise in the price is not earnings driven. This latest surge partly is.

7) The market has not yet figured that PC's are not like TV's and growth will actually accelerate as the installed base increases. I believe Intel's worldwide revenue/earnings potential is greater than the 18%-20% figured by Valuline and First Call. So there will be more good news next year.

Hope this helps.

HL
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