Can Intel Move Higher After Earnings?

With shares of Intel (NASDAQ:INTC) trading around $23, 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 earnings came in slightly lower than the same quarter of last year, reflecting a decreased demand for personal computers and the chips that Intel makes for them, the New York Times reports. Intel was formerly a bellwether of the tech industry, but now that mobile devices and cloud-based software are beginning to replace traditional software, Intel is scrambling to remain relevant as Google (NASDAQ:GOOG) and Apple (NASDAQ:AAPL) are now better indicators of the health of the tech industry overall. Intel’s third quarter revenue came in at $13.5 billion and earnings were 58 cents a share.

T = Technicals on the Stock Chart Are Strong

Intel stock has not made significant progress in the last several years. The stock is currently trading the center of its yearly range but looks ready to head 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 slightly above its 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

22.99%

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

November Options

Flat

Average

December 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 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 Mixed 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

0.81%*

-3.87%

0.04%

-6.30%

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

* As of this writing

P = Weak 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

15.03%

68.75%

27.41%

31.43%

24.26%

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. A recent earnings release has investors optimistic about the company. The stock has been trading sideways for several years and is now near the center of its yearly range. Over the last four quarters, earnings and revenues have been mixed, which have produced conflicting feelings among investors about recent earnings announcements. Relative to its peers and sector, Intel has been a weak year-to-date performer. WAIT AND SEE what Intel does this quarter.

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