Intel Corporation (INTC) is facing a mixed bag of expectations as the company prepares to release its first-quarter earnings report after the close of trading tomorrow. Analysts have zeroed it on the potential for growth in Intel server chips, while the company’s failed attempts to make headway in mobile processors still looms large.
Wall Street is still expecting year-over-year growth for this blue-chip semiconductor giant. INTC earnings are seen rising 17% to 48 cents per share from 41 cents last year, while revenue is expected to rise 8.4% to $13.86 billion.
Indications are that analysts have set their sights even higher, however. According to EarningsWhisper.com, Intel’s first-quarter whisper number arrives at 53 cents per share — a full five cents higher than the consensus.
That said, INTC has met or bested Wall Street’s targets in every quarter for the past two years, so an earnings beat shouldn’t be too surprising at this point.
Taking a closer look at the brokerage community, we find a wealth of bullish sentiment. According to data from Thomson/First Call, 27 analysts maintain a buy rating on INTC stock, compared to 17 holds and just two sell ratings.
While ratings are top loaded, there is room for price-target increases, as the current 12-month consensus target of $35.81 represents a modest premium of only about 13.8% to Friday’s close.
Click to Enlarge Sentiment for Intel stock shifts considerably when we look at expectations from options traders. Specifically, the April/May put/call open interest ratio currently comes in at 1.45, with puts easily outnumbering calls among near-term options. Furthermore, this ratio rises to a hefty 2.61 in the weekly April 22 series, indicating a fair amount of short-term skepticism ahead of Intel’s earnings.
Overall, weekly April 22 series implieds are pricing in a potential post-earnings move of about 4.9% for INTC stock. As such, the upper bound lies at $33.00, while the lower bound lies at $29.92. Technically, INTC has been glued to the $31.50-$32.50 region for the past several weeks, and earnings could finally give the shares a push in one direction or the other.
2 Trades for INTC Stock
Put Spread: The painful demise of Intel’s mobile aspirations does not bode well for INTC stock. Furthermore, the potential upside in server processing does not seem likely to offset continued declines in the PC/laptop market. As such, while earnings may meet or beat current-quarter expectations, guidance could be a major problem.
Those traders looking to side with the bears in the options pits ahead of Intel earnings might consider a May $30/$31 bear put spread. At last check, this spread was offered at 35 cents, or $35 per pair of contracts. Breakeven lies at $30.65, while a maximum profit of 65 cents, or $65 per pair of contracts, is possible if INTC closes at or below $30 when May options expire.
Call Spread: On the other hand, if Intel can show significant enough gains in its server computing division to woo the brokerage community, the ensuing defense of Intel stock could provide lift, even if guidance isn’t as rosy as investors may hope.
Traders looking to follow the brokerage community’s lead might want to consider a May $32/$33 bull call spread. At last check, this spread was offered at 33 cents, or $33 per pair of contracts. Breakeven lies at $32.33, while a maximum profit of 64 cents, or $64 per pair of contracts, is possible if INTC closes at or above $33 when May options expire.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
