Intel Corporation (INTC) Message Board

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Technology Stocks : Intel Corporation (INTC)

INTC 48.58

-0.3%

10:07 AM EST

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To: Jorj X Mckie who wrote (171681)	10/21/2002 2:44:08 PM
From: GVTucker	Read Replies (2) of 186894

If you want a "quick and dirty" justification for the current price of Intel using rational assumptions, it's pretty easy. Start with the 1996 earnings number of $5 billion, a pre-bubble number. Then, use a discount rate of 10% and a long term earnings growth rate of 5%. Both of these over the long term certainly seem possible. Take those $5 billion in earnings and discounted, growing stream of earnings in perpetuity (so that we don't get into any discussion of a terminal value) and you've got a current value of Intel of $100 billion, pretty close to the current number. (The formula for a constant growth perpetuity is x/(r-g) where x=current year earnings, r=the applicable discount rate, and g=the growth rate of earnings. The $5 billion number isn't the current number, I know, but it seems like a pretty good non-bubble non-trough starting point.)

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