Over the next week 24/7 Wall St. will set mid-year price targets (June, 30, 2007) for the sixty most widely traded stocks. These targets will be based on past price performance, industry activity, forward projections of financial performance, outside analyst opinions, and research conducted for doing past articles on these firms. The price targets assume flat markets over the next six months. In other words, if the Nasdaq moved up 25% between now and mid-year, the target share price targets would probably be too low. If the market moved down by 20%, they would probably be too high.
Intel (INTC). Intel has had a rough time of it over the last year. Its share price is down roughly 20%. AMD has been taking market share in both the PC and server industries as companies like Dell began using AMD chips. AMD has also filed an antitrust suit against its larger rival. Intel continues to have detractors. Credit Suisse recently downgraded that stock, saying its new and improved chips and potential market share stability are already priced into the shares.
Of course Wall St. would be no fun without an occasional horse race. Banc of America recently raised its financial estimates for Intel due to increasing sales of notebook and desktop computers.
Intel has two other market currents moving in its direction. There is an assumption that the launch of the new Microsoft Vista OS will improve PC sales. If so, Intel should benefit with somewhere between 75% and 80% of the market. The other potential benefit is the emergence of WiMax, a wireless form of broadband gaining traction overseas and, now, in the US. Sprint is investing $3 billion to build out an infrastructure for it next generation phones. They system is based on WiMax. Intel will be building WiMax capability into its next set of PC chips.
Intel has something that very few companies can boast. Scale. Like Toyota and Google, Intel has a huge budget for R&D and marketing, one that cannot be matched by any of its competitors.
Factors that could move stock price above forecast: If Intel begins to gain back significant share from AMD is the key server market, Wall St. could get fairly excited. If WiMax is adopted in countries like Korea, where its is in broad trials, and shows more promise in the US, Intel is on the leading edge of that revolution.
Factors that could push the stock price below forecast: AMD may be willing to bleed margin to keep up market share gains on Intel. Although that cannot go on forever, it could hurt financial results for both companies in 2007. Also, Vista could be a bust as PC owners keep their current operating systems and delay upgrading.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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