Merrill Lynch joined the list of brokerages who like
these days, but the research firm said Wall Street's consensus forecasts have undervalued the semiconductor company's expected gross margin improvement in the next six to eight quarters.
"Better average selling prices should continue to flow from the shift towards mobile machines, where Intel sees better pricing, and a shift towards higher-priced Pentium M processors within the mobile segment," said analyst Joseph Osha, who upgraded the company to buy from neutral with a $29 price target.
Osha said Intel has been able to price desktop processors "less aggressively" than rival
Advanced Micro Devices
. He also said gross margins should improve because depreciation has declined and 2004 should see a shift to 300mm.
His gross margin estimate for 2003 is 52.3%, and for 2004 it's 56%, up from 55.5%. The analyst increased his EPS estimates to 65 cents from 64 cents in 2003 and to 87 cents from 85 cents in 2004. On average, analysts expect 62 cents in 2003 and 81 cents in 2004.
On Friday, Thomas Wiesel
upgraded Intel to outperform, citing an improved tone among resellers. And UBS
raised Intel's price target Wednesday to $29 from $26 on higher expected earnings.
Shares of Intel were up 3.7% at $24.19 in Instinet trading before the opening bell.