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Initate Coverage Report
July 10, 2008
Intel Corp. (NASD: INTC) $19.96
52-week range $18.05 - $27.99
Market Cap $106.30B
Shares Outstanding 5.28B
Average Daily Vol. 56,416,900
Dividend Yield 2.7%
Book Value $7.11
Price/Book 2.91
Target Price $26.00-$27.00
Target Percentage 30% - 35%

Intel Corp. is the leading manufacturer of semiconductor chips which are used in both the personal and corporate computer market; additionally Intel is a major supplier to the telecommunications industry.

We are recommending Intel stock at current levels which we believe sharply undervalue the company and therefore make it very attractive.

We had previously recommended the purchase of Intel on January 17, 2008 at $19.50 per share and recommended selling the stock on May 14, 2008 at $24.17 per share for a gain of 26.2%. During this period the overall market declined 15%.

Our reasons for once again recommending Intel are as follows:

  • During the first half of 2008, Intel had continued to enjoy good operating results primarily due to increasing demand for chips and chipsets from Asia and Latin America.
  • The recently developed atom chip, which is aimed at the smaller mobile devices market will begin to ship during the third quarter. Intel has acknowledged that the demand and order rate for the atom chip is far greater than anticipated. Obviously this is a high class problem which will further add to profitability.
  • The ongoing cost management program will allow the company to maintain its gross profit margins in the 56%-58% range.
  • Intel has a very strong financial position with cash of over $13 billion and no debt and annual cash flow of about $10 billion.
  • During the first quarter of 2008, Intel repurchased about 122 million shares for about $2.5 billion. We expect the company to continue its program of stock repurchase.
  • Currently, Intel pays an annual dividend of $0.56 per share for a yield of 2.7%.
  • We strongly recommend the purchase of Intel Corp at the current price of $19.96

    We are establishing a target price of $26-$27 per share



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    Please See the Attached Page for Important Disclosures
    A Corporate Communications Corp. Publication ---- All Rights Reserved
    Initial Report / Short Sale
    July 8, 2008



    Discover Financial Services (NYSE:DFS)

    Company Data  
    52-week range $10.96 - $27.45
    Market Cap $6.35B
    Shares Outstanding 479.35M
    Average Vol. 4,811,240
    Book Value $11.80
    Price/Book 1.24
    Dividend Yield 1.7%
    Target Price $9.00 - $10.00
    Target Percentage 32% - 24%

    Discover Financial Services Inc, is a medium-sized independent issuer of credit cards to consumers. Additionally, the company provides third party processing services to merchants.

    We are recommending a short sale of Discover Financial stock for the following reasons:

  • Recently, Discover Financial reported their second fiscal quarter results for the period ending March 31, 2008 which showed that credit losses increased sharply to 5.05% as compared with a credit loss of 3.97% last year.
  • Interestingly, the better than expected second quarter earnings report was mainly due to a lower loan loss provision of $210 million.
  • The management of Discover has stated that the outlook for the remainder of 2008 has deteriorated for the consumer and that credit losses could increase to 5.5%. In view of this outlook coupled with a somewhat low loan loss provision of $210 million, it appears that third quarter results will be less than expected.
  • It should be noted that the $210 million loan loss provision for anticipated losses in the third quarter was essentially similar to the previous quarter. Yet, management is expecting higher loan losses in the current quarter.
  • Discover’s management has acknowledged that the recent proposed rules by the Federal Reserve will have a negative impact. The proposed rules curtail credit card companies’ ability to apply certain fees, billing cycles, and certain interest rates.
  • The third party processing business has performed quite well with growth over 25% annually. Recently, the competitive landscape has intensified with new initiatives by MasterCard and Visa which will have an impact on growth and profitability of this business.
  • The ongoing credit problems of the consumer have resulted in less usage because of card cancellations or lower limits.
  • We are establishing an initial target price of $9-$10 per share



    135 Glenwood Road Glenwood Landing, N.Y. 11547 (516) 656-0217 866-STP-NEWS Fax (516) 656-9523
    Please See the Attached Page for Important Disclosures
    A Corporate Communications Corp. Publication ---- All Rights Reserved
    Important Disclosures
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