Jan 14, 2010: Intel part II, JP Morgan

Intel [INTC:NASD] has just reported earnings of 40 cents per share, above expectations of 30 cents per share. First initial reactions are positive with the stock trading around $22.00 after hours, up from a close of $21.48. The company also reported Q4 revenues of $10.2B and gross margins at 65 per cent. I personally thought the stock would tank like a rock after earnings, and I held my uncovered calls over night, hoping to buy them for cheap tomorrow. I was clearly wrong. The substantial move in the stock price, the unjustified P/E ratio of 51, and low volume signifying little conviction made me believe this is way too high. I just read an hour ago that Intel actually reduced their EPS from $0.44/shr to $0.30/shr as well. It was evident that they would beat the revised target of $0.30/shr, and now the stock continues to soar. The company again has painted a rosy picture for Q1 2010, and is probably why the stock is going up after hours. Yet, every single individual I know thinks this company is well over-valued. Most blue-chip stocks trade at 15 times multiple, yet Intel continues to trade at extremely high ratios, 51 as I said earlier. People are already claiming that Intel is cooking the books, but I'm not going to go to that extent. The company is still in a multi-billion, with a B, lawsuit against Advanced Micro Devices [AMD:NYSE]. Tomorrow morning, JP Morgan Chase [JPM:NYSE] will report their fourth quarter earnings, as the onslaught continues. The expectation for JPM is to report an EPS of $0.61/shr. If JPM reports bad numbers, and the market decides to react negatively, we could see shares of Intel lose its $22 valuation before markets finish the trading day, which would be great news for me. Banks have gone under much criticism the last few weeks, and now we will get a first look at what is happening at the bottom line. The political debate is another blog.