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Good Times Ahead For Intel

J.P. Morgan upgrades price target and earnings forecast for tech leader.

J.P. Morgan lifted estimates and upgraded shares of


(INTC) - Get Free Report

Monday, saying the fourth quarter should be much improved for the semiconductor sector and that the first quarter looks good already with solid demand and stable prices.

"The semiconductor industry is about to experience the 'sweet spot' of upward estimate revisions as lead times become extended, pricing increases and inventory builds due to the continue economic improvement coupled with low levels of supply in the channel," wrote analyst Christopher Danely in a research note. He noted that laptop demand is also solid.

As a result, the analyst upgraded Intel to overweight from neutral, saying the company is the "poster child" for better-than-expected seasonality.

Danely now expects the company to earn 28 cents a share in the fourth quarter on sales of $8.6 billion, from a previous estimate of 27 cents a share and $8.4 billion in sales. For 2003, the analyst forecast full-year earnings of 81 cents a share, up from 80 cents a share, with sales of $30 billion, from a prior estimate of $29.8 billion.

And in 2004, look for earnings of $1.14 a share, from $1.05 a share, with $34.5 billion in sales compared to the $33.4 billion previously.

Shares of Intel were up 27 cents, or 0.8%, at $34.14 in premarket trading, according to Instinet, and are at their highest level since early 2002.

Elsewhere in the tech sector, J.P. Morgan analyst Sterling Auty downgraded shares of

Adobe Systems

(ADBE) - Get Free Report

to underweight from overweight based on valuation.

"We think the good news of this product cycle is factored into the stock, leaving limited upside potential," said Auty.

He said the company's fundamentals still look good, however, with acceptance of new products, for example.

Shares of Adobe were falling $1.85, or 4.1%, at $43.18 in the Instinet premarket session.