With shares of Intel (NASDAQ:INTC) trading around $20, is the company an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for a Stock’s Movement
Intel is a giant and a leader in the semiconductor space. It designs, manufactures, and sells integrated digital technology platforms worldwide. There’s no question about it, Intel is the trend-setter in the chip arena. As technology continues to advance, Intel stands ready to provide processors to run almost every computer-based machine or device. Look for Intel to keep making profits, as demand for its chips will only increase into the future.
T = Technicals on the Stock Chart are Mixed
Intel’s long-term chart reveals that after making highs in 2000, it has been part of a multi-year trading range. However, it has been consistently working its way up with a pattern of higher highs and higher lows extending back to 2009. Last year, it pulled back from the top of its range and is now sitting at support levels. Does the stock have the support to head higher and attempt to take out the top of the trading range?
In order to get more clarity, let’s analyze the the stock’s price relative to its key moving averages. In specific, the key simple moving averages are the 50-day, 100-day, and 200-day, and from these, one can extract the trend and its strength. The stock is trading well below its 200-day simple moving average, while it is seeing its other key averages trading around each other, signaling confusion in the trend. This can only mean neutral to bearish price action in the near future.
One way to gain perspective into investor sentiment is through the use of the options market. More specifically, 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. The implied volatility of Intel options is at 23.69 percent, which coincides with a 76th percentile over the last 30 trading days and 30th percentile over the last 90 trading days.
What does this mean? This means that investors or traders are buying a significant amount of calls and puts relative to the last 30 and 90 trading days. The implied volatility skew of March and April put options is slightly steep, while call option skew is at about average.
This means there is an average demand from call buyers or average supply of call sellers, while there is higher demand by put buyers or lower demand by put sellers, all neutral to bearish over the next two months. Investors are buying a good number of calls and puts and are leaning neutral to bearish over the next two-month period.
E = Earnings Are Mixed Quarter-Over-Quarter
Earnings and revenue growth rates are important factors that are built into the stock price. After all, the stock market is full of predictions. The last four year-over-year quarterly earnings growth rates for Intel have been: -25, -10, 0, and -5.36 percent. The last four year-over-year quarterly revenue growth rates have been: -2.95, -5.45, 3.6, and 0.46 percent. The earnings and revenue growth rates are not entirely convincing, but the investor reaction has the most importance.
How did the markets feel about these numbers? Let’s take a look at the last four quarterly earnings announcement reactions in order to gauge investor sentiment on Intel’s stock. The last four quarters have seen next trading session returns of -6.3, -2.48, 3.29, and -1.8 percent. It is clear that the markets, for the most part, did not appreciate these numbers.
E = Poor Relative Performance Versus Peers and Sector
Let’s take a look at how Intel has performed relative to its peers and sector, year-to-date. Intel is posting a year-to-date return of -2.57 percent while its main competitors Texas Instruments (NASDAQ:TXN), NVIDIA (NASDAQ:NVDA), AMD (NYSE:AMD), and the industry at large have returned 6.47, -0.47, -1.58, and 4.58 percent over the same timeframe. Intel has clearly been outperformed by its peers and sector.
Intel is a leader in the chip arena and the future looks bright for this company. However, the stock has been stuck in a multi-year range and the earnings and revenue growth rates do not seem to be getting any better. Relative to its peers and sector, it has not done very well. In fact, Intel’s performance is lagging by a wide margin. STAY AWAY from Intel stock for now.
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