Intel Corporation (INTC) stock has been a ho-hum performer of late, trading roughly between the $25 to $35 per share range over the last year. Shares are off 3% in the last year, while the S&P 500 is more or less sideways.
In fact, Intel shares are essentially unchanged since July of 2014, a period over which the S&P actually rose 6%.
Can INTC investors expect the stock to finally catch fire following the Intel earnings report after the bell on Tuesday?
INTC Stock: Slow and Steady
Intel remains one of the market’s finest O.G. chipmakers, with a market capitalization of nearly $150 billion, a price-to-earnings ratio of just 13.6 and a dividend of 3.3%. In today’s low-interest-rate environment, it’s a must-own in any sufficiently diversified dividend portfolio.
That’s because I think INTC stock is a great long-term holding. Not only is Intel sure to be a player in semiconductors regardless of what they’re next put to work in — virtual reality, drones, etc. — it has also got a booming datacenter business that’s destined to continue thriving.
Later this year, analysts are starting to think that INTC may be able to snag some decent market share from Qualcomm, Inc. (QCOM), supplying the modems for between 30 million and 40 million Apple Inc. (AAPL) iPhone 7s. But that wouldn’t have much impact on Intel shares until Q3 and Q4, as Apple’s flagship smartphone likely won’t drop until September.
What about Q1?
Wall Street expects to see revenue grow 8.4% from the same quarter a year ago to $13.86 billion. Earnings per share is expected to jump 17%, growing from 41 cents in Q1 2015 to 48 cents in the most recent quarter.
That said, there are a few indications that INTC stock might not be such a great buy if you’re simply looking to make an earnings play. Michael McConnell, an analyst with Pacific Crest, thinks management will reduce Intel’s earnings guidance for the full year when Q1 results are released Tuesday afternoon.
Generally, when companies lower their full-year guidance, they’ve just gone through a bad or disappointing quarter.
Recent rumors might also lend credence to the theory that a Q1 miss is in the making; OregonLive recently reported that internal “sources” confirmed that a huge round of layoffs “across business divisions” is coming at the chipmaker.
Layoffs are typically crude tools that businesses in decline use to boost earnings, reduce operating expenses and increase efficiency. I expect Intel is being proactive here, and wouldn’t be surprised if the company formally announced the layoffs in conjunction with a first-quarter earnings report showing costs rising faster than revenues.
While I do think that INTC stock is one of the few true value stocks in today’s market, I’m a little skeptical about its short-term prospects. If you’re looking to time your buy perfectly, I’d wait until after earnings. Otherwise, now’s as good a time as ever.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
