Intel Stock Climbing Despite Flap Over Pentium Chips Shares Could Be Selling For $95 Within A Year

In case you’ve missed it, Intel’s stock has been climbing - and that sends a message about the $475 million charge it took to cover the replacement of flawed Pentium chips.

Investors worried about the charge and its implications are missing the forest for the trees.

Intel is as formidable as ever and almost certain to post a stellar year. It will ship an estimated 27 million Pentiums in 1995, five times the number in 1994. And it’s preparing for the volume rollout of the next-generation P6 microprocessor in 1996.

Intel also will produce its chips for less, buoying earnings despite expected price cuts. Analysts, on average, believe the chip maker will earn $6.97 a share, up from $5.93 in 1994.

At Friday’s closing price of $71, Intel was selling at only 10 times projected earnings, about a third less than the P/E of most chip stocks.

The betting is Intel will be - roughly - a $90 stock within a year, and not just because of a strong 1995. It plans to spend a record $2.9 billion on new plants and equipment this year, positioning it to offer the 6 million-transistor P6 chip when Advanced Micro Devices and other competitors begin shipping 3 million-transistor Pentium-class chips in volume.

This isn’t guaranteed. A pronounced economic slowdown could pinch PC sales. And rising production and price cuts on AMD’s 100-megahertz 486 chip - which rivals the performance of lowend Pentium chips - could steal Pentium sales.

Overall, though, demand for multimedia home computers and the introduction of Windows 95 this summer should keep PC sales humming. And cheap AMD chips may not mean much because Intel is increasing the power of its Pentiums.