Fleckenstein strikes again(Intel, that is).
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When a tangled-web weaver runs out of yarn:
People who have an interest in this subject should definitely listen to the recent conference call. What they will hear is that in July, when Intel must report this quarter’s results and guide for next quarter, the company is liable to be in a world of hurt. Either it will have to initiate a price war to dump these parts or cut production. Of course, that will have implications for capital expenditures and semiconductor-equipment stocks. Furthermore, if June turns out to be a poor month, Intel may not even meet its new lowered guidance. It has already acknowledged that the "back-to-school build," which was always a bit of a fantasy in my opinion, is behind schedule. So, people can look to Intel for bad news when quarterly results are reported, because guidance has to come down for the third quarter, fourth quarter and all of next year.
That’s why I continue to believe that Intel is headed to $8 to $12. Do the math for yourself. Maybe they'll make $0.40 this year, maybe they'll make $0.40 next year. What's that worth to you? If you pay 40 times, you only get to $16. And why should you pay 40 times for a company that is not well-managed, that has no earnings growth, that must contend with a mediocre end market, and whose competitor, Advanced Micro Devices (AMD, news, msgs), as I noted two weeks ago, is coming out this fall with a better product, called the Hammer?
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Fallout from the Enron/AA/ML && others.
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Along those lines, in a recent edition of The Wall Street Journal, there was an important story called "States Tell Wall Street Firms: Reform, or Lose Our Business." A couple of big state pension funds have announced plans to start putting the screws to the Wall Street firms, enjoining their analysts to start doing their jobs. I think this is the start of an important trend. As time goes on, the pressure will become excruciating, with more and more analysts being forced to utter the dreaded "sell" word. This is not going to be bullish, either, because if analysts do their job now, "sell" is about the only conclusion they'll be able to come to, in many cases. Some day down the road, they'll be able to go back to buying them, but only after sanity has returned.
A positive step in that direction may be read in a headline that recently passed on the tape: "Merrill Lynch & Co. will pay analysts based on the accuracy of their forecasts as part of a settlement of claims that banking interests tainted research.” The firm also cut the number of ratings it uses to evaluate stocks. So, in essence, pay is a function of doing a good job. What a novel idea.
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More at:
moneycentral.msn.com
-tgp |
