Not that tough to figure out how Intel might get to 40:
1.) P/E ratio. A P/E ratio of 15 would get Intel to 30 instantly. A P/E ratio of 16 would get the stock price to 32. And a P/E of 17 would get the stock to 34. It would take a P/E of 20 to get the stock to 40 by itself. A little too much to hope for until we hear that Intel smartphone sales are doubling each quarter like is currently happening with tablet sales. I don't see 15 being unreasonable at all with Haswell, Bay Trail and tablet sales doubling each quarter.
2.) Increased capacity use. Intel easily has the capacity to generate revenues and profits that would support a stock price of 40. We have already seen some big foundry deals and will likely see more. ARM's fabrication struggles at 20nm and with FinFET will dramatically increase interest in Intel's foundry capabilities. We already know of a major mobility player deal that has yet to be announced in addition to the Cisco deal. It is likely that there are many deals being currently negotiated.
3.) Increased mobility sales. The trend in tablets is obviously going to be a major driver of increased profitability going forward. The trend in smartphones and LTE will lag a bit but should be very much in evidence by the end of the year.
4.) Dropping Intel tablet ASPs. As Otellini noted in the earnings conference call, Intel will be able through new fabrication to offer tablets at some amazing price points. This should pave the way to big volumes as Intel makes major inroads into ARM tablet market share.
5.) 450mm Wafer Production. Intel is going to be first to 450mm wafers by a significant margin. This will provide an important new layer of improved economics that will reduce Intel's costs just as ARM is experiencing worsening economics and lessening performance improvements at 20nm. Let's not forget that 20nm is planar and doesn't offer the benefits of FinFET.
Not that tough to figure out how Intel might get to 40: (continued)
6.) Windows 8. I expect Haswell, Broadwell, Clover Trail, and Bay Trail to pump new life into Windows 8 (not including RT) on a plethora of new form factors and to reinvigorate the Wintel relationship. The Wintel ecosystem continues to work its way from servers and desktops down to smartphones. The extension of the ecosystem down should boost revenues and profits.
And while it's early on, I think Intel's web TV venture will get traction. It has the potential to shave a year off the time it will take for Intel to get to 40...
2013: Year of the Intel Tablet
2014: Year of the Intel Smartphone
I looks to me that INTC SOC's will be able to provide additional functions that have previously required additional parts. The INTC SOC will provide:
wifi, 3G, 4G, GPS, Blue Tooth
No one else can do all this. This is tremendous value added content which will result in substantial new revenue per device. The constitutes a huge edge relative to the competition in mobile. This could fill much of that additional capacity. I think 40 is in the bag within a year.