Very Good Question - An even better one a year ago when
the stock began sliding down towards 49 in January. IMHO
what happened was that Intel came to be perceived as another
"commodity" product manufacturer by the street. This was
partly a misjudgement on the part of wall street, partly
the result of observing many boom and bust cycles in
semiconductors, and partly the result of the pentium fiasco.
Also earnings did not grow steadily, relentlessly, reliably,
quarter for quarter, year for year. In the days of IBM
and Xerox growth, the earnings growth was totally relentless
and predictable. In one of my posts about a year ago I
addressed this same issue and came to the conclusion that
PE multiple would occur only after a prolonged series of
earnings that demonstrated irrefutably that Intel could be
counted on to grow earnings at a rate in excess of 20% a year.
That is beginning to happen and so now the multiple has begun
to edge up. On the other hand, Wall Streets error was my
good fortune since I bought more at 57 last January. Again,
my guess is that the multiple may peak at between 25 and 30
leading to a price way over 200. All this assumes a reasonably
stable world, with no oil embargo, major war or domestic
upheaval. And a market that doesn't tank bigtime.
Good investing,
Burt |
