x - Cramer rag on Intel over 100
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Commentary : Wrong! Dispatches from the Front
A Tale of Intel
By James J. Cramer
1/14/00 12:08 PM ET
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So Intel (INTC:Nasdaq - news) went to 100. How did it happen? Was it the earnings? Was it the psychology behind it? Was it some new catalyst?
First, it turns out that despite how much we talk about it, Intel was "underowned." That means funds did not have enough Intel relative to other stocks, notably stocks in the S&P 500. They had to come in and buy after this quarter, simply because it was pretty darn good and the stuff that they own is more expensive than Intel, but may not be better!
Second, the stock was heavily shorted, as people simply didn't believe that Intel could put it together so huge that it could really run. Intel, until this year, has always been hampered by its lack of a huge multiple. But in an era where many stocks sell at a higher multiple to revenues than Intel sells as a multiple to earnings, the conventional wisdom coalesced to say Intel should be revalued upward. That revaluation is happening before our eyes.
The revaluation also squeezed the shorts who thought the only thing that would matter would be the earnings number that printed. Some of them are still fighting a rear-guard action to minimize the posted earnings, claiming that it was inflated by Intel's brilliant cash management and its gains on investments. But in an era where CMGI (CMGI:Nadaq - news) trades at a $50 billion market cap because of those kinds of investments, it seems a little silly to expect that Intel will be penalized for its incubation profits.
Finally, Intel trades on expectations and the guidance from this company was extraordinarily bullish this time around. These folks see their stock as beginning to reflect the investments made in communications and understand that the growth for Intel will no longer be bound by personal computer growth.
Their enthusiasm infected the marketplace the way Jeff Berkowitz's flu infected me! Like lightening.
That's how Intel traded to 100. And more.
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PB
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