Updated from March 1

As analysts get nervous on a stock in the short term, investors often grow more bullish. That contrarian mind-set has lately played out with Intel ( INTC).

The chipmaker's stock has stumbled while analysts fret over the company's financial update today. But many institutional investors are excited about the chance to buy the stock at a discount to its recent peak.

"We've added a lot in the sub-$30 range in the last few days," said Matt Kelmon, manager of the ( KSEAX) Kelmoore Eagle fund, which is long Intel. "I'm very bullish at this price -- I think Intel will trade through the 52-week high through the end of the year."

Since hitting a 52-week high of $34.60 intraday on Jan. 9, Intel shares have steadily lost ground, recently trading up 53 cents, or 1.83%, at $29.57 heading into the company's much-anticipated midquarter update.

Against that backdrop, a handful of research notes have warned that weak shipments of notebook computers could hurt Intel. Banc of America recently cut its first-quarter sales estimate for Intel from $8.27 billion to $8.09 billion and shaved its EPS forecast from 28 cents to 26 cents, despite saying Intel's sales should benefit from acceleration in PC buying later in the year.

J.P. Morgan dropped the shares from buy to neutral Monday morning, also citing expectations for weak notebook sales.

In January, Intel said first-quarter sales should fall between $7.9 billion and $8.5 billion, with gross margin of about 60%, plus or minus 2 percentage points. On average, analysts expect 28 cents in earnings on sales of $8.3 billion, with most predicting Intel will tighten guidance toward the midpoint of its sales range. (Intel does not provide earnings guidance.)

Some investors think the short-term worries are crowding out a fairly rosy PC outlook this year and next. Market research group IDC expects 11.4% shipment growth in PCs in 2004.

Right now, the stock "is getting close to 20% down from its high," noted Kelmon. "That's a pretty good correction, what you used to see in the late '90s -- a rise then a nice 20% pullback. I really believe a pullback will shake out a lot of the weak longs. I think the risk for me is not capitalizing on the next move higher."

Moreover, not everyone is expecting Intel to broadcast caution in its midquarter update. Bear Stearns expects Intel to tilt revenue and gross margin guidance to the higher end of the range, predicting that solid shipments of desktop processors -- which outnumber notebook chips by four to one -- should offset the impact of weak notebook shipments.

At investment manager J.W. Seligman, analyst Sangeeth Peruri expects Intel to see upside after its midquarter update, given the prevailing jitters leading up to it. (J.W. Seligman owns shares of Intel.)

Intel shares have retreated because investors have begun to view the stock as a bet on PC end-market growth, rather than a play on improving gross margins, Peruri suggested. After Intel reported a blowout third quarter last year, analysts started incorporating more generous margin expectations into their models. So to beat EPS expectations now, Intel would need to see better-than-expected end-market growth. While the PC outlook is certainly improving, "people have in the back of their mind that this won't last forever; PCs are mature," Peruri said.

None other than Intel CEO Craig Barrett sounded a cautionary note on the 2004 outlook last week, when he predicted 15% sales growth for both Intel and the chip industry in comments to a Japanese newspaper. The projection is actually a little below the Wall Street consensus revenue estimate for Intel, which calls for the company's revenue to rise 16% to $34.96 billion in 2004, up from $30.14 billion last year.

"That equals no real upside, at least on current numbers," said one tech fund manager who took profits in Intel when it was trading in the $32 to $34 range.

The money manager, who requested anonymity, said he might be inclined to start buying the shares again if they suffer a little more downside -- say to the $28 level. "If you look at PC unit numbers for this year, expectations keep going up," he said.

In a similar vein, Peruri thinks the stock represents decent value under $30. He pegs the downside case for Intel's 2005 earnings per share at $1.40 vs. the First Call consensus estimate of $1.47. But he thinks EPS could reach as high as $1.60.

Taking the low-end earnings estimate and applying a conservative multiple of 20 times yields a stock price of $28, which Peruri considers to be a fair floor for the stock.

Since investors are often willing to pay closer to 25 times earnings for Intel, if the high-end $1.60 EPS estimate starts to look reasonable by the close of 2004, he thinks the stock could get up near $40.

Bottom line: There's a decent chance Intel shares could see upside if the company sounds upbeat today. But even if that scenario doesn't pan out right away, many investors are increasingly willing to bet the stock has room to rise later this year.