To: VICTORIA GATE, MD who wrote (64215 ) 9/10/1998 3:27:00 AM From: TTOSBT Read Replies (1) | Respond to
INTEL (INTC) 81 29/32. Today, the pendulum swings back to bullish. There is a debate raging between strong bulls on Intel (INTC), who believe that a return to strong profit growth is just around the corner as the PC market is picking up, and those that believe the profit slide will continue with a shift towards lower priced PCs. For the former, INTC is a dominant high-tech company that can control its destiny, and for the latter, a firm subject to the vagaries of a commodity producer. Occasionally, valuation even gets discussed. Today, the bulls regain the upper hand as two brokers make positive comments. Prudential Securities upgrades INTC from "accumulate" to "strong buy" (only a one notch move despite appearances), and DLJ has reiterated its "buy" rating on the stock. INTC is indicated to open about 1 1/4 points higher. On Thursday, Morgan Stanley Dean Witter reiterated a "strong buy" on INTC and raised its earnings estimates for 1998 from $3.05 per share to $3.15 a share, and for 1999 from $3.85 to $3.90 per share. This rallying around the company has helped support the share price after it fell below 70 just five trading sessions ago. It also reflects increased optimism, as most estimates for 1998 are about $3.00 $3.05 per share, and for 1999 about $3.50 to $3.75 per share. Estimates are inching back up. Yet, INTC is a long way from being a value stock. Earnings have fallen on a year-over-year basis for three straight quarters, and the third quarter will also be down. Taking the high-end estimate of $3.15 per share earnings from Morgan Stanley for 1998, INTC trades at 26 times current earnings. That is pricey given the earnings slump and weak global economic outlook. After all, INTC earned $3.88 per share in 1997, so even the optimistic 1999 forecasts just bring earnings back to where they were. Yet, there are many who believe that INTC should be a core holding in all portfolios as a technology leader. Today, the momentum is back in favor of the bulls. Until more analysts (including Merrill's Kurlak) are on board in forecasting sustainable earnings growth, however, there will also be times when the momentum swings back towards the bears.
