Intel investors skeptical after analysts' mistakes
Tuesday May 11, 3:06 pm ET
By Daniel Sorid
SAN FRANCISCO, May 11 (Reuters) - Buy high, sell low. That, in essence, was Wall Street's advice last year on shares of Intel Corp., the world's largest chip maker.
Investors are wary about being misled again, as analysts' calls are more bullish than ever ahead of their meeting with Intel (NasdaqNM:INTC - News) on Thursday.
"The analysts were wrong, completely wrong," said Marshall Front, chairman of Front Barnett Associates, an investment company that has about 2.1 million Intel shares. "And these are people who are being paid to make these calls. It's strange."
Any followers of their advice would have missed out on one of Intel's best-ever runs, and started buying the stock just in time for a steady sell-off through the first half of 2004.
As the stock was in the early stages of a year-long rally last May, nearly half of all analysts told investors to buy no more. In December, as the stock approached its highest level since early 2002, 80 percent rated it "buy" or "outperform," according to Reuters Research data.
Today, 83 percent of analysts have those bullish ratings.
Intel's stock rose $1.12, or 4.22 percent, on Tuesday afternoon to $27.67, off a January high of $34.60.
"Frankly, a guy can do a great job as an analyst and be a lousy timer as to when to buy and sell it," said James Luke, who manages the $300 million Large Company Growth Fund of BB&T Asset Management Inc.
He said he doesn't judge analysts by their investment ratings, which are "based on so many different things, maybe faulty assumptions," but rather, by their insight into the industry and competition.
STATE OF THE INDUSTRY
On Thursday, Intel executives will lay out the state of the personal computer market, the restructuring of its money-losing communications business, and the progress of upgrades to its manufacturing process.
In its last official update, Intel's second-quarter revenue forecast lagged Wall Street estimates. While a mid-quarter update is scheduled for June 3, top executives on Thursday will most likely indicate whether business is in line with previous forecasts.
"We expect the analyst meeting will be a mild plus for Intel, and that it will mark the beginning of positive sentiment coming back into the stock," Goldman Sachs analyst Andrew Root wrote in a recent note to clients. He has an "outperform" rating on Intel.
David Wong, who follows Intel for A.G. Edwards, is looking less to broad commentary on industry conditions than Intel's technological endeavors.
"I'm expecting to hear that they're on track," said Wong, who recommends buying Intel shares.
Wong said he expects Intel to say that manufacturing upgrades have gone smoothly and will save costs. It is also likely to elaborate on the surprise cancellation of the development of two upcoming chips, he added.
Intel last Friday said it had scrapped the chips and would accelerate the development of an altogether new style of processor that, in essence, contains two chips in one.
Wong wrote in a recent note to clients that the shift has the potential to leave a gap in Intel's product plans.
Front, of Front Barnett Associates, shares analysts' optimism about Intel despite his skepticism about their advice.
He expects "conservative" optimism from Intel's executives, as well as positive commentary about the market for personal computers, the Santa Clara, California-based company's bread-and-butter business.
"I think they're going to say that sales to PC manufacturers have begun to pick up," he said. "Overall, the tone should be positive and should reflect both the company's conservative style of providing guidance and at the same time should point toward a continued recovery." |
