Intel Corp (INTC)

[wbmw]

I still think Intel is undervalued.

At $27, the current P/E is 21.6 ($1.25 EPS - ttm, not 2004). Analysts expect $1.35 (+ 16%, vs $1.16 for 2004) for this year and $1.49 (+ 10%) next year. Given these figures, that's a forward P/E of 20 and 18.1, respectively, conservative for a stock with tons of cash, no debt, and >10% YoY earnings growth. Moreover, I think the expectations are conservative.

In raw dollars, Intel posted end of year revenues at $26.8B, $30.1B, and $34.2B. That's 12% and 14%, respectively. But in earnings, they posted $4.38B, $7.53B, and $10.1B, which is 72% and 34% growth, respectively. Obviously, earnings can't continue to outgrow revenues forward, but it's clear that Intel is reaping the benefits of 300mm wafers, increased GMs, and new premium products, and I think it's likely to continue to a degree, at least more than the analyst's conservative 16% and 10% growth expectations.

And if this is the case, Intel should be getting a P/E closer to 30. I expect that would result in a stock price of 30 times the ttm P/E of 1.25, or $37.50 per share. IMO, that would be a fair value for Intel.