SAN FRANCISCO (CNN/Money) -
Following Intel's stock sure is a confusing affair. Is the news good or bad?
Just last week, Intel narrowed the range of its expected first-quarter revenues, effectively boosting the midpoint of its projections. The stock rose 3.6 percent on heavy volume the next day to $34.17. (Indeed, the stock has been one of the best performers in the Dow, up more than 60 percent since September.)
On Wednesday, Intel disclosed in a federal filing that its severely-lowered 2002 capital spending budget remains unchanged. One analyst lowered 2002 earnings estimates, and the stock fell some 6 percent around $31, bringing down much of the Nasdaq with it.
What gives? For starters, Intel is the stock that both amateurs and professionals love to use as a macro play on technology. When the climate is perceived to be improving, they buy Intel. The reverse is also true.
The problem is that the climate isn't improving that much. As I explained in a recent issue of Business 2.0 magazine, the downturn that afflicted the semiconductor industry in the past two years was perhaps the worst ever.
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And when you dig down, even the good news isn't that encouraging. Research shop IDC made headlines with its report Tuesday that the PC industry will recover in 2002. The details: IDC is forecasting PC unit growth of 3 percent in 2002, compared with a decline of 5.2 percent last year. That's just not impressive enough growth to translate into robust growth for shares of Intel, which for all of its efforts to broaden its products, still gets most of its profit from chips for PCs.
In his research report to clients Tuesday, J.P. Morgan Securities analyst Eric Chen said Intel will suffer from continued price competition, confusion among its many products and swollen inventory. "We believe that shares of Intel could retest the mid-to-high $20 range during (the second quarter) and recommend investors trim (their) near-term positions," he wrote.
Well, at least Chen's opinion is clear.
A sure-thing growth business? Here's a quick idea for parents out there who like to invest on the Peter Lynch rule of buying what you know. A dinner party companion last week mentioned that she knows of three friends who are six months pregnant. A post-Sept. 11 baby boom? Absolutely. Makes total sense. Think about all those childless couples, faced with the new world reality, saying, "Hey, we better get on with it."
So who benefits? Any company that sells heavily to new parents. A shot in the arm for Gap's (GPS: Research, Estimates) babyGap unit? Healthier than usual sales for P&G's (PG: Research, Estimates) Pampers? How about a boost for Johnson & Johnson (JNJ: Research, Estimates) and its Baby Shampoo? Have other ideas of big winners if there's a baby boomlet? Send 'em along.
Send e-mail to Adam at firstname.lastname@example.org.
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