Intel Sets 52-Week High as Earnings Impress

Updated from 9:07 a.m.

Intel(INTC) was up 3% after setting a 52-week high earlier Wednesday as investors welcomed its blowout third-quarter earnings report.

Intel's shares were recently up $1.03 to $32.11 after topping out earlier in the session at $32.78, eclipsing the old 52-week peak of $31.10.

After the bell Tuesday, the microprocessor giant reported third-quarter revenue of $7.83 billion, 20% above last year's levels and higher than analysts' expectations for $7.69 billion. Net income of $1.7 billion translated into earnings per share of 25 cents, more than double last year's 10 cents and 2 cents a share above expectations.

Merrill Lynch Wednesday raised its price target to $40 from $32 and said the stock looks significantly undervalued at 26 times Merrill's new 2004 estimate of $1.20 a share, up from its previous $1 a share. Merrill thinks the company will enjoy stable prices and little competition from Advanced Micro Devices (AMD) (AMD).

A $40 price would value Intel at over 50 times consensus 2003 earnings of 77 cents and at 38 times consensus 2004 earnings estimates of $1.06.

On Tuesday's conference call, CFO Andy Bryant said Intel had posted the best third-quarter sequential growth in more than 25 years. Results got a boost from strong growth in emerging markets such as China and India and healthy consumer buying in the U.S.

"Our resolve to invest aggressively during the downturn is paying off with double-digit revenue growth and a doubling of profit compared to a year ago," said CEO Craig Barrett.

The company said it believes it gained about a point of market share in microprocessors in the third quarter and several points in chipsets. Average selling prices grew slightly, helped by growth in mobile and server units.

"Computing continued to improve in the emerging markets, western Europe, Japan and the U.S. consumer channels. However, there was only modest growth in PCs in the U.S. corporate segment," said Bryant on the call.

Fourth-quarter revenue is expected to range from $8.1 billion to $8.7 billion, putting the midpoint past the high end of analysts' expectations for $8.3 billion in sales. Projected fourth-quarter growth of 17% would be the highest since 1998, said Bryant.

Courtesy of the higher revenue, Intel expects fourth-quarter gross margins in the range of 60%, up from the third quarter's 58.2%.

Intel doesn't offer EPS guidance, but Wall Street was looking for 26 cents in the fourth quarter leading up to today's report.