Re: so, at $22 stock price, the forward looking PE is about 17 - not really low for a company, that may not sustain more than 10-15% growth rate long-term (next 5 years)
No doubt about it, INTC is a mature company. But one thing to realize is that 2007 is a recovery year with Intel pricing their products to win back share and begin distancing themselves from the competition. Intel actually has products that people want to buy, they are proving themselves to be reliable in their roadmap and customer centric in their product line. As far as their main CPU business, I think it's on the path to deliver good incremental growth (10-15%), like you said.
Beyond that, it takes more before the actual stock of the company appreciates. That's why I am encouraged in a few new areas:
1. Intel's platform approach: I think this is an innovative way to get more Intel silicon in a machine, and it seems to be paying off. vPro has already been deployed at >200 large corporate datacenters, for example, and Centrino Pro launches soon.
2. Intel's UMPC mobile platform: I think this is a very new and interesting emerging mobile platform with potentially a lot of new growth. I can imagine demand for a portable PC with performance capabilities in addition to total connectivity could be bigger than Centrino.
3. Intel's PCM (Phase Change) memory: this, in addition to their NAND offerings, could be an explosive new market. And as flash drives and flash drive caches begin growing in popularity and functionality with respect to current mechanical drives, that could also vastly increase demand for Intel flash. Plus, I think news of the sale or divestiture of the NOR business would give a positive lift to the stock.
4. New CPU architecture in 2008: I think Nehalem may be a product that Intel can use to really differentiate itself from AMD. If they could match AMD's positioning and pricing in the mainstream part of the market, there may be enough performance in this architecture to open up some more premium price points and allow those who want more performance to lift ASPs and margins in 2009.
5. Consumer electronics: I like Intel's push in this segment, and I really like the fact that they are already offering SoC products to this segment. I am looking forward to good things from this division. Putting x86 in your living room is a great growth opportunity.
6. Health: we haven't heard much from this new division, except for one mobile product that went towards the healthcare system. I think this group is still embryonic, but there are literally billions of dollars of opportunity here, and perhaps some way for Intel to tap into it.
So basically these are my top 6 parts of the company that I think stand a reasonable chance of offering new growth. If any one of these ends up being a home run, then I can see the stock hitting $30. If more than one... well, you use your own due diligence and invest accordingly.
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