Richard basically speaks for me, about all I'd add is that, given
equivalent investment quality (e.g. earnings predictability) P/Es
tend to correlate with growth expectations. The market
believes MSFT has higher growth prospects than INTC. The
market is looking forward, not back. Ultimately INTC growth
will correlate with world-wide PC demand, figured to be at
best 25% in a good year, and more like 20% average for the
next 5 years. (These assumptions could well be wrong.)
Having said that, if you read my posts from the past few months
you'll see that I've consistently thought MSFT was somewhat
overvalued at it's current P/E, and INTC was undervalued
(not anymore, though). By my model MSFT should be trading
at no more than 35 P/E, and more like 32. INTC is worth
it's current 25 P/E, in my opinion, but there's more risk in the
earnings future -- the market does not consider INTC and MSFT
to be of "equivalent investment quality". I think, if you look at
the ups and downs of past earnings, you'd have to agree. |
