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Wednesday, November 12, 2008

Intel (INTC) estimates under pressure

Yesterday Piper and FBR cut estimates. Today Covello at Goldman takes a hatchet to his numbers, bringing 2009 from $1.15 to $0.75 and 2010 from $1.45 to $1.00. Builds for Q4 have been significantly below Intel's guidance of slightly up. The variable in Covello's cuts is gross margins, which he anticipates will trough at 48% in the June 2009 quarter -- for perspective, Intel guided to 59% for the current quarter.

Buyers of Intel stock are thinking it's a market leader and pretty cheap historically. I would say that Intel trading at close to 18* 2009 estimates would not be cheap. Over the last several years, Intel hasn't grown much. In 2005 revenue was higher than in 2007, for example. I maintain that Intel deserves a 10 P/E, which would put it at $10 on Covello's 2010 numbers.

For the record, Covello's calls often coincide with counter-moves. His timing can be just awful.

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