Is Intel Ready to Entertain Your Portfolio?

With shares of Intel (NASDAQ:INTC) trading around $34, is INTC an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Intel designs and manufactures integrated digital technology platforms, including microprocessors and chipsets. The company sells these platforms primarily to original equipment manufacturers, original design manufacturers, and industrial and communications equipment manufacturers in the computing and communications industries. Intel’s platforms are used in a range of applications such as personal computers, data centers, tablets, smartphones, automobiles, automated factory systems, and medical devices.

Intel’s shares rose as much as 7 percent to a decade high after the world’s largest chipmaker forecast quarterly revenue above analysts’ estimates on demand from companies looking to replace old PCs. At least 19 brokerages raised their price targets on the stock to $29-$45, while two brokerages raised their ratings to an equivalent of “buy.” The broker actions came after Intel forecast on Tuesday second-quarter revenue above the average analyst estimate. CFO Stacy Smith told Reuters that PC sales had stabilized, easing fears about the four-year decline in computer sales as consumers turn increasingly to tablets and smartphones. Intel also raised its share buyback program by $20 billion.

T = Technicals on the Stock Chart Are Strong

Intel stock has been exploding higher over the last couple of months. The stock is currently trading near all-time highs and looks set to continue. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Intel is trading above its rising key averages, which signals neutral to bullish price action in the near-term.

Source: Thinkorswim

Taking a look at the implied volatility (red) and implied volatility skew levels of Intel options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Intel options

17.8%

0%

0%

What does this mean? This means that investors or traders are buying a very small amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

August Options

Flat

Average

September Options

Flat

Average

As of Wednesday, there is average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very small amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Intel’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Intel look like and more importantly, how did the markets like these numbers?

2014 Q2

2014 Q1

2013 Q4

2013 Q3

Earnings Growth (Y-O-Y)

41.03%

-5%

5.33%

48.72%

Revenue Growth (Y-O-Y)

7.96%

1.43%

2.6%

5.47%

Earnings Reaction

8.48%*

0.59%

-2.59%

1.32%

*As of this writing.

Intel has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been pleased with Intel’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Intel stock done relative to its peers – AMD (NYSE:AMD), NVIDIA (NASDAQ:NVDA), and Texas Instruments (NASDAQ:TXN) –and sector?

Intel

AMD

NVIDIA

Texas Instruments

Sector

Year-to-Date Return

22.17%

17.05%

20.91%

10.82%

18.73%

Intel has been a relative performance leader, year-to-date.

Conclusion

Intel is a developer of technology products such as microprocessors, chipsets, and software, and distributes them to companies and consumers around the world. The company’s shares rose as much as 7 percent to a decade high after the world’s largest chipmaker forecast quarterly revenue above analysts’ estimates. The stock has been exploding higher over the last couple of months and is currently trading near all-time highs. Over the last four quarters, earnings and revenues have been increasing, which has left investors pleased. Relative to its peers and sector, Intel has been a year-to-date performance leader. Look for Intel to OUTPERFORM.

Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

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