Intel (INTC) posted second-quarter earnings per share of 33 cents on a 15% revenue rise. The chipmaker sees third-quarter revenue of $9.6 billion to $10.2 billion. JP Morgan downgraded the stock to neutral.
Analyst Christopher Danely says Intel is running out of leverage, and downgrades to neutral from overweight. While second-quarter EPS was 2 cents above his estimate, and 1 cent above consensus, revenue fell 2% sequentially and gross margin was below his estimate due to lower than expected pricing.
Danely is concerned with pricing pressure, peaking utilization rates, and gross margins resulting in lower-than-expected leverage. As a result of a peak in leverage and increasing capex, he believes further upside to his estimates are limited.
He cut his $1.49 2005 EPS estimate to $1.45, and $1.60 for 2006 to $1.55.