What do you think about the estimates? Are they low, high, or right on the money? And what is a reasonable multiple for INTC? I personally think that a multiple of anything greater than 20 is in the high range. Over 25 and we are definitely talking OVER VAULED.
So if the industry leader, w/ margins nobody else can come within a parsec of, is overvalued, let's look at a couple of other players:
DEC - Currently, carrying a PE of approx. 38, due largely to Compaq's bid to acquire the co. One has to admit that the 1990's has not exactly been the Digital decade, nor would it likely to be anytime in the future if left to fend for itself. But, yet, obviously Compaq sees some value there, otherwise they would not be a buyer at such a multiple. Let's think about, if a loser of a co. such as DEC can command a PE from a very astute party, what would a fly-by-nite co. like Intel command?
AMD - I won't even attempt to slam Sanders here, as doing so would constitute child abuse. But still, comparing AMD to INTC here must be a math PhD's worst nightmare. AMD has negative earnings, in case some out there are not aware. W/ a negative denominator, you can't even come up w/ a trailing PE (I think anybody would be hard pressed to even project positive earnings anytime soon, so even projected PE's are worthless here). So, a co. that can't post earnings w/ any regularity sells for almost $20? (Maybe, we should start a rumor that they're a biotech, just to give AMD holders comfort. "Well, maybe, someday, they could have a marketable product, and, boy, they'd be worth something then.")
NSC - They currently command a PE of 12. Why? Could it be something to do w/ low expectations?
Samsung? Please.
Motorola? They have seen the future. It sure isn't in butting heads w/ Intel.
Mo, you even have to admit that it's very likely AMD won't even be around a few years out. And it's feasible that NSC won't even be in the PC/CPU business in the future. And who knows what CPQ is going to do w/ DEC? So, who's left standing? Intel. And yet you say a PE of 25 is overvalued? I'd love to look at your portfolio. I bet it must fascinating to look at those GM and Bethlehem Steel certificates you have hanging on the wall, and w/ all the certificates of deposit hid under the mattress.
Do I suggest that there is not a limit on fair value for Intel? Of course not. But FV is most definitely higher than the current price.
I would also step forward to say that the points here on the thread re: they're capital intensive, they can't have a high PE, blah, blah, blah, yadda, yadda, yadda is myopic. Have those who say that even looked at Intel's balance sheet? Do you think that the book value of their assets even come close to fair value? No way.
I'm not being a INTC cheerleader here, but just saying w/ half of the other garbage on the market commanding a PE equal to or higher than INTC's, I think it's hard to say Intel can not rationally be valued as high as it is or even higher. |
