Can Intel Stock See Rising Prices?

With shares of Intel (NASDAQ:INTC) trading around $22, 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.

The company 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.

Intel has declared a 22.5 cent per share quarterly dividend, in line with its previous dividend. It has a forward yield of 3.8 percent, and is payable on December 1 for shareholders of record on November 7. It has an ex-dividend date of  November 5.

T = Technicals on the Stock Chart Are Mixed

Intel stock has remained in a consolidation range for most of the past several years. The stock has seen a sharp pullback from highs for the year, so it may need time to stabilize. 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 between its key averages, which signals neutral price action in the near term.

INTC

Source: Thinkorswim

Taking a look at the implied volatility 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

28.24%

96%

95%

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

October Options

Flat

Average

November Options

Flat

Average

As of Friday, 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 significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

E = Earnings Are Decreasing 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?

2013 Q2

2013 Q1

2012 Q4

2012 Q3

Earnings Growth (Y-O-Y)

-27.78%

-24.53%

-24.40%

-10.77%

Revenue Growth (Y-O-Y)

-5.11%

-2.53%

-2.95%

-5.45%

Earnings Reaction

-3.87%

0.04%

-6.30%

-2.50%

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

P = Weak 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

11.78%

62.92%

27.08%

29.95%

24.37%

Intel has been a poor relative performer, 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 has recently reissued its dividend, as expected. The stock has not made much progress in recent quarters and is now trading near mid-prices for the year. Over the last four quarters, earnings and revenues have been decreasing, which has produced mixed feelings among investors. Relative to its peers and sector, Intel has been a weak year-to-date performer. WAIT AND SEE what Intel does this coming quarter.

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