Foolish Forecast: Intel on Intel

Microprocessor company Intel (Nasdaq: INTC  ) will report second-quarter earnings Tuesday night. Look back at the first-quarter results, then come back for a freshly Foolish look.

What Fools say:
Here's how Intel's Motley Fool CAPS rating stacks up against some of its peers and competitors:

 

Market Cap (billions)

Trailing P/E Ratio

CAPS Rating

Intel

$108.6

18.1

****

NVIDIA (Nasdaq: NVDA  )

$6.2

8.1

****

Micron Technology (NYSE: MU  )

$4.1

N/A

***

Advanced Micro Devices (NYSE: AMD  )

$2.9

N/A

**

Atheros Communications (Nasdaq: ATHR  )

$1.9

52.9

*****

Data taken from Motley Fool CAPS on July 14, 2008.

Several of our CAPS players point to Intel's stock being undervalued today. Others liken this chip giant to the slow and steady tortoise of legend and fables.

On the flip side, our bears see dark antitrust clouds gathering, with potentially dire consequences. A few even turn around the valuation argument, thinking that the stock is overpriced today. Who's right?

What management does:
The all-out price wars against Advanced Micro Devices in 2007 are fading as Intel's growth picks up speed amid expanding margins. Above all, the company is generating cash by the boatload once again.

Margins

12/06

3/07

6/07

9/07

12/07

3/08

Gross

51.5%

50.2%

49%

49.8%

51.9%

52.8%

Operating

17.5%

17.7%

18.3%

20.1%

22.8%

23.9%

Net

14.3%

15.1%

15.9%

16.6%

18.2%

17.3%

FCF/Revenue

13.5%

13.1%

16.8%

19.4%

19.9%

22.3%

Y-O-Y Growth

12/06

3/07

6/07

9/07

12/07

3/08

Revenue

(8.9%)

(7.9%)

(3.1%)

4%

8.3%

10.9%

Earnings

(41.8%)

(32.1%)

(14.6%)

3.5%

38.3%

27.4%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Without Advanced Micro Devices playing the Washington Generals to Intel's Globetrotters, I don't think that the chip giant would be in this fine shape today. Adjusting to lean times and tough competition can prepare any market leader to make the most of better days, when those return.

That said, the tables have turned again, as AMD has hit a few critical release windows lately while Intel is the processor producer with short-term execution issues again. That's why I don't expect a hugely successful quarter here. Management expects between $9 billion and $9.5 billion in revenue, up from $8.9 billion a year ago, and I'd settle for the lower end of that range, steady profit margins, and consequently slightly higher earnings than the $0.22 per share reported last year.

Atheros Communications is a Motley Fool Hidden Gems selection, Intel is an Inside Value pick, and NVIDIA is a Stock Advisor recommendation. Try any of our Foolish newsletters today, free for 30 days. Or just sign up for a free CAPS account.

Fool contributor Anders Bylund owns shares in AMD but holds no other position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure is the Punxsutawney Phil of financial forecasting.


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