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

To: Tony Viola who wrote (64149)	9/9/1998 11:14:00 AM
From: Ibexx	Respond to of 186894

Tony and thread, Details of Prudential's upgrade: _____ INTC: UPGRADING TO STRONG BUY FROM ACCUMULATE. MOMENTUM BUILDS FOR HOLIDAY SEASON. Subject: Intel Corp. (INTC-81 7/8)--OTC SEMICO COM EPS OPINION Current: STRONG BUYAnalysts: Hans C. Mosesmann (415) 395-2627 Prior: ACCUMULATE Ali Far (415) 395-2626 Risk: HIGH Alex Gauna (415) 395-262412-Month Target Price: $100--------------------------------------------------------------------------------Ind. Div.: 0.12 Yield: 0.15% Shares: 1769 mil. 52-Wk.Range: 102-65--------------------------------------------------------------------------------EPS FY Year P/E 1Q 2Q 3Q 4Q Actual 12/97 $ 3.87 21.2 $ 1.10 $ 0.92 $ 0.88 $ 0.98 Current 12/98 $ 3.14E 26.1 $ 0.81A $ 0.66A $ 0.79E $ 0.88EPrior 12/98 $ 3.07E 26.7 $ 0.81A $ 0.66A $ 0.72E $ 0.88E Current 12/99 $ 4.15E 19.7 Prior 12/99 $ 4.15E 19.7 * EPS from continuous operations is used for the FY98 and FY99 figures.-------------------------------------------------------------------------------- We are upgrading INTC to Strong Buy from Accumulate as a result of improving momentum entering the seasonally robust holiday season and upsides to consensus third-quarter estimates. We are increasing our third-quarter 1998 revenue and earnings estimates to $6.55 billion and $0.79, from $6.10 billion and $0.72. Our new 1998 revenue and earnings estimates are $25.4 billion and $3.14, up from $24.9 billion and $3.07 respectively. Our 1999 estimates remain intact at $31 billion and $4.15 respectively. In our opinion, 1999 represents Intel's return to 20% plus growth rates as the company enters new markets, transitions to 0.18 micron process geometries, and regains lost market share at the low end of the market. Our new 12-month target price for the stock is $100, up from $95, based on a 24 multiple to our $4.15 1999 earnings estimate which is at the high end of Street estimates. Key Points: - Robust Q3 Demand. Intel is benefiting from a robust processor demand environment for both low and high end processors. PC inventories in the channel which were a problem in the first half of 1998 appear to have been cut to more reasonable levels. Furthermore, the company appears to be benefiting in Q3 from delayed Q2 processor buying as a result of the Windows 98 introduction delay. - Ten Percent Processor Unit Growth With Flattish ASPs. Our analysis and checks in the channel point to sequential processor shipments for Intel in the third-quarter to be in the 23.2 to 23.5 million unit range, up from our estimated 20.8 million in the second-quarter. We expect average selling prices (ASPs) for the third-quarter to be in the $209 to $211 range which is flattish to second-quarter levels. - The New Mendocino Means Business. It appears Intel's newest Celeron chip, Mendocino, is regaining market share at the low end of the market. While Intel struggled to effectively address the sub$1K PC segment earlier in the year, the new Mendocino chip addresses the relative performance problems of the Covington chip (the first Celeron family member). Our view is that Intel is regaining lost market share in this important segment and will remain competitive in the market going forward. We expect Celeron shipments to represent over 20% of processor shipments in the third-quarter. - Product Cycle Acceleration Will Be Tough To Match. While high-end processor demand is also robust, the real story is the accelerated product cycle. The rapid introduction of both the 400 MHz and 450 MHz PIIs combined with the "obsolescence" of the 200 MHz and 233 MHz counterparts has shifted the performance sweet-spot of the market to 300 MHz-333 MHz. We view this product introduction schedule (which should continue in the near-term) extremely difficult for Intel's competitors to match, with the immediate result of ASP and market share declines for the more marginal players which do not have the resources to keep the pace. Only AMD (AMD-15 1/8, Hold rated) appears to have the near-term potential to continue this race, however, as we enter 1999 AMD will also be challenged to keep up. - The Comeback Year, 1999. We view 1999 as the year for Intel to resume revenue and earnings growth. Given the rapid migration of the bulk of the market to the Slot I motherboard interface (used by the PII), the company's migration to 0.18 micron line geometries, and the new Xeon chip for servers and workstations, 1999 should be Intel's return to 20% plus growth levels. Furthermore, we expect Intel in 1999 to "decelerate" its product cycle (as in the past) in order for software applications to catch up to the processor power available, with the side benefit of ASP and margin expansion (in a less competitive processor environment). - Increasing 1998 Estimates. We are increasing our third-quarter 1998 revenue and earnings estimates to $6.55 billion and $0.79, from $6.10 billion and $0.72. Our new 1998 revenue and earnings estimates are $25.4 billion and $3.14, up from $24.9 billion and $3.07 respectively. We are leaving our 1999 revenue and earnings estimates of $31 billion and $4.15 intact. - Outlook. Every few years Intel is confronted by unexpected and significant challenges which threaten the viability of the company's strategy. The sign of a good company is how it responds and overcomes these challenges and we believe Intel has responded effectively and has overcome the challenges of the low end of the PC market. We are upgrading INTC to Strong Buy from Accumulate and our new 12-month target price is $100, up from $95. Our valuation is based on a 24 multiple to our new $4.15 1999 earnings estimate. ___ Ibexx PS: Sorry about the messed up Table; you can still figure things out, I think.