Off Reuters feed.
FRiday
Intel Ascent Far From Over
NEW YORK - Intel's stock price has doubled in the last six months and some analysts think it's still a bargain.
In the last two days, Wall Street analysts who cover the company have tossed around target numbers ranging from $160 to
$200 per share, and market analysts see little reason to argue. Intel closed unchanged yesterday at 136-7/8 after rocketing
more than seven points the day before.
"Based on the simplest methods, Intel looks cheap," said Scott Bleier, chief investment strategist at Prime Charter. "It's trading
at a lower multiple than its growth rate."
Even after the latest round of binge buying, which has pushed Intel to a series of all-time highs, chip analysts continue to
recommend the shares no one seems willing to sell.
To be sure, some question the very near-term outlook.
"If I were a trader I would not chase the stock here," said Gregory Nie, technical analyst at EVEREN Securities. "The
conservative approach would be to say enough's enough and take profits."
But for many, particularly portfolio managers, taking profits now is simply not an option, and their last-minute holiday shopping
is only feeding the frenzy, analysts said.
"There is a ferocious end-of-the-year deployment of funds going into technology, and right now every mutual fund in the world
must own Intel," Bleier said. "If anyone has any technology representation, they must own Intel."
Some of the renewed interest is part of a broad move back to chip stocks. Prudential Securities chip analyst Mark Edelstone
sees some risk of market overzealousness.
The chip group "has had a tremendous move since the industry turned in July, and at this point you have to pay attention to
valuation," Edelstone said. "The risk going forward is the stocks will be ahead of the fundamentals."
Since July, Intel's performance has outpaced even that of International Business Machines. Since an intraday bottom of 89-1/8
on July 24, IBM is up 66 points, or 74 percent. Intel, meanwhile, is up more than 75 points from its 64-1/8 July 16 low, for a
sizzling 117 percent gain.
Even so, analysts remain sanguine about Intel's valuation.
The company is a unique player in its sector, largely because it faces no real competition for its Pentium-class processor chips.
In meetings this week with analysts, Intel executives said chip-making plants are running at full capacity, signaling robust
demand.
For those reasons, Edelstone said Intel enjoys very high margins, a key reason its valuation is still reasonable.
He maintains a buy rating and yesterday raised his 12-month target price on the shares to $170 -- far from outlandish, given
other estimates on the Street.
Also yesterday, Oppenheimer & Co analyst Jim Poyner raised his target on Intel to $160, and Merrill Lynch analyst Thomas
Kurlak raised his 1997 earnings estimate to $9 per share with a $200 target.
"I think Kurlak has it best," said Philip Orlando, chief investment officer at Value Line Asset Management. "At $9 in earnings
for next year, then we're only at a 15.5 P/E (price to earnings) multiple now for Intel."
In contrast, he said, the S&P 500 is trading at a 17.8 multiple based on consensus estimates and a recent peak.
"That means we're at discount for Intel, and the blue chip company of chip stocks probably ought to be better than a 15
percent discount," he said.
Using $200 as a target yields a 22.2 multiple on 1997 earnings, a roughly 25 percent premium to the S&P 500. "Can you
justify that?" Orlando said. "The answer is probably yes."
The positive fundamental story is the primary reason even Nie believes investors are better served holding onto Intel, despite
his aversion over the very short term.
"For an investor, the trend is up," Nie said. "I wouldn't be surprised if the stock has a well deserved time out, but even if it took
a 10- or 20- or even 30-point correction, that would not change the overall trend." |
