Intel shares have performed well year-to-date, gaining 16.67%, and 38.28% year-over-year.
The chip giant has had exceptional gross margin performance, in the low 60% range, and J.P. Morgan raised its first-quarter earnings estimates for the firm, as Danely believes orders are tracking ahead of estimates. J.P. Morgan expects $13 billion in revenue and gross margins of 64% in the first quarter, compared to Intel's guidance of $12.3 billion and $13.3 billion in revenue, and gross margins of 61% to 65%.
"We are expecting above-seasonal QoQ growth in 2Q12 due to inventory replenishment but roughly normal seasonal growth during 2H12. Moreover, our C12 gross margin estimate of 63.8% is below the midpoint of Intel's guidance of 64.0% due to lower sales," Danely wrote in his research note.
Despite Intel's exceptional performance potential and short-term upside, J.P. Morgan downgraded the name in January, on worries about peaking gross margins and estimates. Since the downgrade on January 17, shares have gained 10.54%, compared to a 13.5% gain in the Nasdaq. Danely rates Intel shares "neutral" with a $25 price target.