PALO ALTO, Calif. (CNN/Money) -
The sentiment gods are alive and well. Just look at the market's reaction to Intel's numbers.
Intel modestly upped its fourth-quarter revenue guidance Thursday, giving investors hope that the tech drought is nearing an end. Dive down just a little bit into the numbers, however, and you'll see that the sorry situation barely has changed for at least the second half of this year.
To review, in early September, the last time Intel (INTC: Research, Estimates) gave Wall Street mid-quarter guidance, the company said it expected third-quarter revenues of between $6.3 billion and $6.7 billion, and the stock surged 7 percent to $16.20. A month and a half later, when Intel reported third-quarter revenues of $6.5 billion, that was a disappointment, and the stock plummeted to $13.53. If you recall, investor sentiment was lousy this fall.
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Fast forward to Thursday. Intel says fourth-quarter revenues will be between $6.8 billion and $7.0 billion -- raising the higher end of guidance by a mere $100 million. (That's 1.4 percent for those keeping track at home.)
And yet, on the strength of stronger sentiment -- and little else -- Intel's shares have soared some 40 percent since October, closing Thursday at $18.96. (In after-hours trade, shares were actively traded and gained a bit to $19.11, according to Island ECN.)
Is Intel worth 40 percent more because revenues stand to be a little better in the fourth quarter than the company previously had led us to believe? Here's an even better question: What's the correct multiple for a company that's not growing?
A year ago, the last quarter of what Intel CEO Craig Barrett called "a terrible year for our industry," Intel registered $7 billion in revenues. That's right. If the company hits the high end of its new range, revenues will be flat compared with its annus horribilis.
Intel will register somewhere around $26.5 billion in revenues this year. Its market capitalization is about $100 billion greater than that, giving the company a price-to-sales ratio of about 5. In comparison, other technology/manufacturing companies have significantly lower multiples, including IBM (2 times sales), Dell (2), and Hewlett Packard (1).
Some will say Intel's news Thursday is good news. I'd say it's not bad news. To get another 40 percent pop to its stock, it's going to need some of the former, not merely the latter.
Adam Lashinsky is a senior writer for Fortune magazine. Send e-mail to Adam at lashinskysbottomline@yahoo.com.
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