Shares of Intel Corp. (Nasdaq: INTC) closed up 13 percent Friday after analysts cheered the company's fourth quarter upside surprise and first quarter outlook.
The company closed up 12 to 103 1/16 after hitting an intraday high of 106 5/8. Intel, a recent addition to the Dow Jones industrial average lifted the Dow to a new high and accounted for most of its gains.
Intel cruised past estimates in the fourth quarter with earnings of $2.4 billion, or 69 cents a share, on sales of $8.2 billion. First Call was expecting earnings of 63 cents a share. Average selling prices were solid, product mix was good and margins were strong.
Looking ahead to the first quarter and fiscal 2000, Intel said it expects first-quarter sales to slip slightly from the fourth quarter due to seasonal factors.
"Most important, the outlook for Intel is very strong,'' said Erika Klauer, a Deutsche Banc Alex. Brown analyst. ``Many investors may discount Intel's guidance for a slight sequential decrease in sales for first quarter since a good portion of demand was unmet in the fourth quarter.''
It predicts that gross profit margins will be essentially flat with the fourth quarter, right around 61 percent. Expenses should decline between 3 to 5 percent to $2 billion primarily due to lower advertising spending.
Analysts cheered the news and raised Intel price targets across the board.
"Exiting a supply constrained quarter, the March quarter features positive inventory dynamics," said USB Piper Jaffray analyst Ashok Kumar, in a report. Kumar added that Intel growth should exceed PC growth in the first quarter. "Increased demand from Europe and Japan should drive strong first half," he said.
Kumar, who rates Intel a "strong buy," also said Microsoft's rollout of Windows 2000 will help Intel's prospects.
"The stock's 24 percent advance in 1999 significantly under performed the 99 percent return for the SOX index," said Kumar. "However for 2000 the positive IT environment, a global recovery and the richer product mix should resuscitate revenue growth and as a result improves money flow metrics. Our new 12-month price target is $110 or 40x our 2000 estimate."
Kumar is predicting revenue of $32 billion for 2000 and earnings of $2.70 a share..
Lehman Brothers and Gruntal gave Intel a price target of $125 and raised estimates for 2000. CS First Boston upped 2000 estimates to $3.00 a share from $2.55 a share.