Can Intel Head Higher After Recent Headlines?

With shares of Intel (NASDAQ:INTC) trading around $25, 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.

Later this evening, Intel CEO Brian Krzanich will speak at the Consumer Electronics Show in Las Vegas to present the company’s plan to regain relevancy in a world that has switched from Intel’s specialty of personal computers to mobile devices as their primary means of computing. According to a source who spoke to Bloomberg, Krzanich will use the enormous trade show as an opportunity to show off some new mobile and wearable tech devices created by Intel’s New Devices division. Krzanich will also highlight how Intel has quickened its pace in regards to getting new products to market.

T = Technicals on the Stock Chart Are Strong

Intel stock has not made significant progress in the last several years. The stock is currently pulling back and may need time to stabilize before heading higher. 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

26.12%

76%

73%

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

February Options

Flat

Average

March 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 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 Q3

2013 Q2

2013 Q1

2012 Q4

Earnings Growth (Y-O-Y)

48.72%

-27.78%

-24.53%

-24.40%

Revenue Growth (Y-O-Y)

5.47%

-5.11%

-2.53%

-2.95%

Earnings Reaction

1.32%

-3.76%

0.04%

-6.30%

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

P = Average Relative Performance Versus Peers and Sector

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

Intel

AMD

NVIDIA

Texas Instruments

Sector

Year-to-Date Return

-1.32%

7.92%

-0.50%

-2.16%

1.98%

Intel has been an average performer 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 CEO Brian Krzanich will speak at the Consumer Electronics Show in Las Vegas to present the company’s plan to regain relevancy. The stock has not made significant progress in the last several years and is currently pulling back. Over the last four quarters, earnings and revenues have been decreasing. However, investors have been optimistic about recent earnings announcements. Relative to its peers and sector, Intel has been an average year-to-date performer. WAIT AND SEE what Intel does this quarter.

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