Zeev -- thx
Under those assumptions, I can see the appreciation potential.
Of course I don't buy the assumption that Intel will be able to hold the temporary jump in GMs they just announced for this quarter. AMD's finally getting a superior 64 bit chip to market is going to squeeze Intel in the fattest part of their margins, and the huge jump in percentage of sales from mobile chips is unsustainable -- a temporary product of the introduction of the Centrino.
Perhaps I'm a skeptic, but I don't for a second buy your top-line growth estimate of 15% a year. I think they'll be lucky to see 2/3 of that, and realistically, I think high single digits is the most likely outcome.
I guess I don't see a 35 p/e at cycle peak either. Unless we wind up with a general market frenzy like coincided with the peak of the last cycle.
Still, as you point out, 30x on $1.50 leads to $45. So maybe that's the game to play. To me, this is a bigger fool game, though, predicated on there being some mighty big fools to eat the thing at $45 and then suffer through at 30% to 40% bath in the 18 months after.
And ... if it turns out we see declining GMs (almost a certainty, IMO) into the beginning of next year, and a stalling of momentum in revenue growth, or even possible a retrenchment -- both very possible -- then it would stand to reason that not only does the stock fall relative to the reduced expectations, but that the silly multiple now afforded gets compressed too. And that, IMHO, could easily lead to a 25+% loss from here.
Of course there is the spectre of options and dilution hanging out there. I'm sure you know that more than 1/2 of Intel's "profits" would disappear overnight if they were forced to account for options/dilution. At a minimum that has to be factored in as a risk factor, as it's certainly possible they are eventually forced to account on that.
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