Intel Earnings Preview: 2 Trades for INTC Stock

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The first half of 2015 has been rough for semiconductor bellwether Intel Corporation (INTC). Despite strong adoption of Microsoft’s (MSFT) Windows 10 operating system, PC sales have come in below Intel’s forecasts, leading to heavy pressure on Intel’s stock price. That said, the company has hopes for a stronger-than-anticipated seasonality in the second half of 2015 — a development that could show up in Intel stock’s fourth-quarter guidance.

Diving into the numbers, Wall Street is expecting third-quarter earnings of 59 cents per share of Intel stock, on revenue of $14.23 billion. These figures are down from earnings of 66 cents per share and sales of $14.55 billion in the same quarter last year.  

Still, Wall Street is largely hopeful that INTC earnings will remain strong. For instance, EarningsWhisper.com reports that the company’s third-quarter whisper number comes in at 60 cents per share — a penny better than the Street’s estimates.

Additionally, Thomson/First Call reports that 23 of the 45 analysts analysts following Intel stock rate the shares a “buy” or better. Despite the overall bullish rating configuration, there is still plenty of room for potential upgrades. There is also room for price-target increases, as the current 12-month consensus target of $35 represents a meager premium of only about 9% over current levels.

Options traders, on the other hand, are not all that optimistic about the Intel stock price. Specifically, the October/November put/call open interest ratio currently comes in at 1.40, with puts easily outnumbering calls among near-term options. Furthermore, this ratio rises to 1.51 in the October series, hinting at low expectations for Intel earnings.

10-12-2015 INTC
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All in all, October implieds are pricing in a potential post-earnings move of about 4.7% for Intel stock. As such, the upper bound lies at $33.51, while the lower bound lies at $30.49.

INTC has technical momentum on its side after breaking above all of its major short-term moving averages. Shares must still overcome resistance near $34, but support should remain firm in the $30 to $31 region.

2 Trades for INTC Stock

Call Spread: The trend may be your friend with Intel stock, as strong guidance could help extend the shares’ recent upside breakout. Traders looking to capitalize on a post-earnings rally might want to consider a November $33/$34 bull call spread. At last check, this spread was offered at 30 cents, or $30 per pair of contracts. Breakeven lies at $33.30, while a maximum profit of 70 cents, or $70 per pair of contracts, is possible if INTC closes at or above $34 when November options expire.  

Put Spread: On the other hand, poor guidance could undermine INTC’s current rally, sending the stock down for a retest of support near $30. Those traders siding with the bears ahead of Intel earnings might consider a November $31/$32 bear put spread. At last check, this spread was offered at 30 cents, or $30 per pair of contracts. Breakeven lies at $31.70, while a maximum profit of 70 cents, or $70 per pair of contracts, is possible if INTC closes at or below $31 when November options expire.  

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/10/intel-stock-earnings-preview-trades-intc/.

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