Shares of Altera Corp. advanced in premarket trading Tuesday after the chip maker raised its fourth-quarter revenue outlook, citing improved demand and strong sales to telecom equipment manufacturers, especially for deployments in China and India.
But analysts aren't sure whether the increase is due to a real economic rebound or restocking of inventory levels that could not be sustained.
"Given these disparate views, we remain on the sidelines," said Jefferies analyst Adam Benjamin in a research note.
Shares of Altera were up 92 cents, or 4.4 percent, to $21.95 in premarket activity. The stock has ranged from $12.99 to $22.15 over the past year.
On Monday, Altera said it expects fourth-quarter revenue to increase by 15 percent to 18 percent from the prior quarter. Previously, Altera forecast growth of 6 percent to 10 percent.
The company, based in San Jose, Calif., said sales to wired and wireless telecom equipment makers will be the biggest contributor to fourth-quarter growth as demand improves.
Benjamin raised his fourth-quarter earnings estimate to 29 cents from 25 cents per share. For 2010, he increased his revenue estimate to $1.4 billion from $1.3 billion and his earnings projection to $1.25 per share from $1.11 per share.
BMO Capital Markets analyst Ambrish Srivastava said that while Altera's forecast was impressive, "it was hard for us to gauge the sustainability of the current strength."
The analyst raised his 2009 earnings estimate to 78 cents per share from 74 cents, and his 2010 estimate to $1.16 per share from $1.12.