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Technology Stocks : Intel Corporation (INTC)
INTC 48.72+3.0%Jan 14 3:59 PM EST
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To: Raymond Thomas who started this subject7/15/2004 1:10:33 PM
From: Saturn V  Read Replies (2) of 186894
 
The response to Intel's Earnings is irrational.

The inventory increase was due to higher yields, and not due to a lack of demand. So the higher yield will eventually translate to higher profits downstream. The higher inventory is clearly a problem if it is due to a reduction in customer demand. But such is clearly not the case.

The lower expected margin is due to a faster projected increase in the low margin business like flash, motherboards, chipsets, communication. But the profit is still increasing.

The stock price is supposedly tied to expected profit, and that should be the primary metric. However Wall Street, in a bout of cyclical pessimism, has been overwhelmed by the secondary metrics like inventory increase and margins. These secondary indicators are often predictors of profitability, but in this case these indicators are not valid.

Clearly the response is irrational, but eventually Wall Street does indeed respect earnings. The degradation of the secondary metrics has given some people an excuse to take their money off the table. The real problem is elsewhere, interest rate and election worries, etc. In a few months time all this nonsense will be forgotten.
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