Thursday, January 14, 2010

NICE "Beat and Raise" by Intel (INTC)

Intel (INTC) released fourth quarter and full year 2009 results a few minutes ago, handily beating on revenue and earnings.

Shares are up 1.5% after hours, given the excellent performance and increased forward guidance.

“Intel's strong 2009 results reflect our investment in industry-leading manufacturing and product innovation,” said Paul Otellini, Intel president and CEO. “This strategy has enabled us to generate unprecedented operating efficiencies while growing our traditional businesses and creating exciting new market opportunities, even in difficult economic times. Our ability to weather this business cycle demonstrates that microprocessors are indispensable in our modern world. Looking forward, we plan to deliver the benefits of computing to an expanding set of products, markets and customers.”

One number that caught my eye was inventories. As of December 09, Inventories as a % of revenue was 28%, versus 46% a year ago. Intel is entering the new year LEAN, which looks to me like a potential for upside on margins.

How does Intel put up numbers like these with such dismal employment numbers in the US? Well for starters, less than 20% of sales come from the US.... although to be fair, many sales to Asian manufacturers then go and sell those products here...

Here's my "Quick N' Dirty" forward look at Intel, and what the company's shares are worth. There's a downside and upside margin scenario, as well as 24 different price targets to confuse us (you're welcome!). An average of all 24 targets gets me to....$24 per share(just a coincidence), upside of less than 10%. If pressed, I would say my estimates err on the conservative side, and would say there's an 80% chance the share head toward the $31 upper end target, and a 20% chance they end 2010 at the lower target of $18. Not to mention that investors might give this company a much richer PE (or lower necessary Free Cash Flow Yield) than I do. Considering the quality of management here and their operational track record, these shares a a bargain.....



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