Intel Corporation (INTC) –INTC stock gapped down in mid-January after the semiconductor company reported better-than-expected fourth-quarter earnings of 74 cents per share versus analysts’ estimate of 63 cents. Inventors seemed spooked by continued weakness in the crucial PC market. However, Intel stands to benefit from the launch of 5G networks, which should help offset the weakness in PCs.
This week, AT&T Inc. (T) announced plans to start rolling out a next-generation network by year end that is expected to deliver speeds between 10 and 100 times faster than 4G. Competitor Verizon Communications Inc. (VZ) made a similar announcement in the fall. But AT&T also said it will collaborate with Intel and Ericsson on its 5G network.
S&P Capital IQ Equity Research, which rates INTC stock a “Buy” with a 12-month target of $39, said it expects 40% of Intel’s revenues to come from non-PC markets this year. Its analysts anticipate overall revenue growth of 6.2% in 2016. They also expect the company to grow cash flows enough to repurchase shares and raise the dividend. Intel currently pays an annual dividend of $1.04 per share for a yield of 3.6%.
INTC stock appears to have formed a triple-bottom at about $28 on a support line connected to a reversal last year. Following the August reversal, shares ran to about $35.
INTC stock opened a gap from $31.80 to $30.50 following the Q4 earnings report. It partially closed the gap by the end of January with a run to $31. Gaps of this nature are typically fully closed, which is why they often provide excellent trading targets.
Buy INTC stock at $28.50 with a target of $32, which would close the gap and result in a trading profit of more than 12%. Long-term investors may want to hold shares for even bigger gains as the company participates in the 5G rollout.
