Some more from the Lehman Bros. report posted on their site last night.Interesting reading.
FINE TUNING 4Q EPS UP (STILL BELOW CONSENSUS); NO CHANGE IN 1998. Intel
recently entered its quiet period still indicating it was on track to meet 4Q
guidance of some sales growth, flat gross margin, 10-15% increase in operating
expense, $160 mil. in other income, and a 35.5% tax rate. Intel throughout
1997 has beaten its operating expense estimates, so there is again some upside
opportunity from control of this item. We assume 5% sales growth, flat gross
margin, and 12.5% growth in operating expense (slightly higher sales growth
than previously) and estimate 4Q EPS at $0.88 (old: $0.86) vs. consensus of
$0.90. We continue to estimate 1998 at $3.80, 1999 at $4.55.
VIEWPOINT: THE BIG DROP IN INTEL's STOCK PRICE IN RECENT MONTHS IS CLEARLY
BUILDING A VALUE STORY. NEED SOME MOMENTUM. DON'T REALLY SEE IT NOW. At
roughly 3.5x a market sales multiple and 1.1x a market multiple of book, Intel
is in the lower third of its historical range. We also believe Intel merits
selling in a higher range than the one it has recently enjoyed. Technology
stocks, however, need momentum, and we just do not see that now. The
principal issue at Intel during the past 9 months has been the reemergence of
competition and a consequent much more competitive pricing environment which
has pushed gross margins down. Asia-Pacific is also an issue, though the
impact of that is less clear currently (30% of Intel's sales are into Asia-Pacific,
but about half of that is reexported). WE SEE COMPETITION AS THE KEY
NEAR TERM DETERMINANT OF MOMENTUM AND STOCK PRICE. WE REMAIN CAUTIOUS NEAR
TERM. |
