My 2 cents on the Intel vs. MSFT P/E differential:
P/E's don't go from 15 to 50 in weeks or even months in large-cap stocks. They can go from 15 to 20 to 25 to 30 (roughly), and beyond, quarter by quarter, as investors become more confident that each next quarter's news will be good. Intel's multiple expansion has roughly parallelled MSFT's over the past year, but MSFT started out at 30 or so a year ago, while Intel was at 15 or so, after having a few flat quarters before getting Pentium ramped up. If Intel continues to have upside surprises for a few more quarters, their P/E should continue to grow as long as the market dominance looks intact; if MSFT disappoints (unlikely), their P/E could quickly drop below Intel's.
I remember 6 months ago, people on this thread were lamenting that Intel had historically never been given a P/E of greater than 20. We all would have been delighted at the time to get to a P/E of 30! If Intel is as good as most of us on this thread think it is, it should keep a P/E of 30 (absent a bear market), and if analysts' estimates of $11 profits in 1998 are accurate, we'll be at $330 in 2 years. Who could ask for more? A higher P/E and faster rise than that would probably make a lot of folks nervous and could bring the bear out of hibernation. be careful what you wish for! |
