This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Microsoft, Intel Are Buys Ahead of Earnings

BOSTON ( TheStreet) -- Tech goliaths Microsoft (MSFT - Get Report) and Intel (INTC - Get Report) are sitting on record cash balances and have delivered solid growth amid the recovery, but their stocks haven't matched expectations, including rave reviews from equity researchers. Intel is due to report second-quarter results Wednesday and Microsoft will release fiscal fourth-quarter results Thursday. The tech dividend stocks are attractive picks, even as growth tapers.

Analysts forecast that Intel, the world's largest chipmaker, will suffer a marginal decline in second-quarter adjusted earnings to 51 cents. They expect sales to have grown 19% to nearly $13 billion. Microsoft is predicted to have increased adjusted earnings by 12% and sales by 7.5%. With market capitalizations of $121 billion and $228 billion, respectively, such expansion is impressive, especially in light of sub-2% gross domestic product growth. Going further, Microsoft is the world's most powerful software company, with a wide economic moat, and Intel has lead market share in semiconductors. Their financial girth is apparent on balance sheets.

Corporate America has, quite literally, never been healthier -- in stark contrast to a government drowning in an estimated $75 trillion in cumulative debt and unfunded liabilities, including Medicare and Social Security. The fiscal uncertainty has investors unwilling to buy equities, despite historically cheap valuations, near-peak margins and efficiency and the aforementioned financial flexibility. This behavior looks increasingly illogical as mega caps such as Microsoft and Intel demonstrate that international growth prospects trump a tepid domestic economy. In sum, these blue-chip companies are still attractive.

Intel gets positive reviews, including "buy," "outperform" or "overweight" recommendations, from 61% of researchers in coverage; Microsoft gets 69%. At the end of its fiscal third quarter, Microsoft held more than $50 billion of cash, equivalents and short-term investments and just under $15 billion of debt, for just over $35 billion of net cash and a quick ratio of 2.5. A pending acquisition of Internet phone-company Skype should reduce net cash by $8.5 billion. The buyout has been applauded by researchers, who have been frustrated by the company's lethargy amid liquidity. Skype generated $180 million of unlevered free cash flow in 2010.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
INTC $30.36 -0.82%
IT $87.11 -1.37%
JPM $62.56 -1.93%
NOK $5.82 -1.85%
MSFT $49.78 -1.64%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs