$INTC announced a strong third-quarter result this week but warned about deteriorating market conditions. $INTC’s share price has dropped from US$16.99 to US$14.99 since the beginning of this week – an 11.8% decline. We decided to have a look at $INTC with the Valuecruncher interactive tool to place an estimate on the intrinsic value of the company.
Valuecruncher produces a valuation of US$17.92 for $INTC. This is a current valuation (an estimate of intrinsic value) not a target price. This valuation is 19.6% above the current share price of US$14.99.
In 2007 $INTC had revenues of US$38.3 billion and an EBITDA margin (profits) of 35.27%. Reuters aggregates 35 analysts covering $INTC and these have mean estimates of 2009 and 2010 revenues of US$39.9 and US$42.8 billion respectively. For our analysis we have used US$39.5 billion in 2008, US$41.5 billion in 2009 and US$43.0 billion in 2010. We have forecast EBITDA margins remaining flat at 35% to 2010. We have estimated capital expenditure in the US$4.95-5.35 billion range. All of these assumptions can be amended in the Valuecruncher on-line valuation model to adjust the valuation.
Other Model Assumptions:
Discount Rate: 11.0%. We believe the discount rate is in the 9-11% range. We have used the upper end of this range to reflect the deteriorating market conditions that $INTC have signalled.
Our analysis incorporates the cash and debt on the $INTC balance sheet – Valuecruncher calculates a net debt number.
Based on our analysis and assumptions the current share price looks a discount to intrinsic value. Play with our assumptions – what does your analysis say?