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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: GVTucker who wrote (173126)	2/19/2003 11:32:26 AM
From: Jack Hartmann	Read Replies (1) \| Respond to of 186894

No real reason I hope Edelstone does better than Dan Niles who wrote this at INTC high in December when INTC was $22. :P On Monday, for example, Dan Niles of Lehman Brothers, raised his rating to "equal weight," pointing out that within a historical forward P/E range of 18 to 69, Intel's forward PE of 32.5 based on 2003 estimates, puts it not far off its median valuation of 28 or so. And Niles believes Intel can do much better than the 60 cents per share expected for 2003, coming in around 80 or 90 cents. That would justify a price more like $22 to $25 if the P/E stays constant. If Niles is right, those who would consider Intel and AMD and others expensive have yet to factor in a boost in PC buying by companies in the first half of next year. Prices on corporate PCs tend to be higher than for consumer units, and so an upgrade cycle should drive not only top line growth but profits as well. Niles' faith has already been partly rewarded, it's worth noting. AMD on Thursday forecasted that it expects revenues for the quarter to grow by 35% or better to 700 million. That's more than previously expected. Niles set a price target of $10 for AMD in the same Intel report. money.cnn.com I like Jon Joseph from SSB as the best in the sector. BLAZING FINISH? Don't forget, however, that many analysts have long predicted slow growth in demand for chips in 2003 -- and that Intel must cut costs rather than ramp up capacity. In that light, Barrett's moves look like a sound strategic decision. Standard & Poor's recently upgraded the stock from avoid to hold, based on fourth-quarter performance and the capital-spending cuts. Lower costs -- more than a recovery in demand -- could make Intel's financials shine later this year. Let's look at the fourth quarter, which ended Dec. 31. Intel sold 34 million processors, surpassing its previouls quarterly record of 33 million units in 2000, estimates Jonathan Joseph, an analyst with Salomon Smith Barney. Yet it generated $1 billion less in profits than in its record quarter of 2000. That's because processor prices have fallen. And Intel's overall costs have increased as a percentage of revenue, partly because it has invested in new chipmaking plants, or fabs. As a result, gross margins now stand at 51.6%, vs. 62.9% two years ago. THREE OPTIONS. Intel has three ways Intel to restore margins, Joseph figures: The first would be a jump of 25% to 30% in unit sales. Second, prices on processors might rise by the same amount. Third, costs could shrink. Option No. 1 looks problematical. Chip sales should increase by only 9% this year, according to Salomon Smith Barney. Option No. 2 appears no more likely, since Intel's processor prices have fallen 30% from a high of $235 in 1996, estimates Joseph, who sees that trend continuing. He has a point: Processor speed, which had been accelerating by between 60% to 70% annually, will increase by only 11% in 2003, Joseph believes, and a typical PC buyer goes for lower price, not faster performance. Plus, Intel's main rival, AMD (AMD ), will unveil several new chips this spring, which could further pressure Intel to pare prices further. www.businessweek.com/bwdaily/dnflash/ jan2003/nf20030127_1277.htm I like to think that INTC will bounce lower since the buy volume leading the surge is much lower then October 2002 and January 2003. Jack (No position)