Can Intel Continue Its Path Towards Higher Prices?

With shares of Intel (NASDAQ:INTC) trading around $24, 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. It also develops and sells software and services primarily focused on security and technology integration. Microprocessors, chipsets, and software products and services are at the root of most technological progress. A bellwether and main provider like Intel will see rising demand and increased market share as it is the only viable option for a growing consumer base and expanding companies worldwide.

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T = Technicals on the Stock Chart are Strong

Intel stock has been part of a value range extending back several years. The stock is currently seeing higher highs and highers lows that may take it to the top of its range and possibly beyond. 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 signal neutral to bullish price action in the near-term.

INTC

(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

23.57%

90%

88%

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

Put IV Skew

Call IV Skew

June Options

Flat

Average

July Options

Flat

Average

As of today, there is an 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 significant 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?

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2013 Q1

2012 Q4

2012 Q3

2012 Q2

Earnings Growth (Y-O-Y)

-24.53%

-24.40%

-10.77%

0%

Revenue Growth (Y-O-Y)

-2.53%

-2.95%

-5.45%

3.6%

Earnings Reaction

0.04%

-6.3%

-2.5%

3.27%

Intel has seen decreasing earnings and revenue figures over most of the last four quarters. From these figures, the markets have been mixed about Intel’s recent earnings announcements.

P = Poor Relative Performance Versus Peers and Sector

How has Intel stock done relative to its peers, Advanced Micro Devices (NYSE:AMD), Texas Instruments (NASDAQ:TXN), Nvidia (NASDAQ:NVDA), and sector?

Intel

AMD

Texas Instruments

Nvidia

Sector

Year-to-Date Return

17.46%

67.92%

18.10%

19.29%

19.92%

Intel has been a poor relative performer, year-to-date.

Conclusion

Intel provides essential technology including microprocessors, chipsets, and software products and services to a growing consumer base and expanding companies around the world. The stock has been part of a long-term range but a recent run may see it tagging the top of this range if not breaking above it. Over the last four quarters, earnings and revenue figures have mostly decreased which has produced mixed feelings among investors. Relative to its peers and sector, Intel has been a poor performer year-to-date. WAIT AND SEE what Intel does this coming quarter.

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