Intel (NASDAQ:INTC) stock has been on a wild ride so far this year. Shares have traded in a $44-$58 range year to date and are currently trading near the bottom on that range.
Intel has a decent setup because it recently increased its guidance, sold a business unit and the stock is trading near long-term support.
In the second-quarter earnings release, Intel increased their full year 2019 outlook. The revenue outlook came in at $69.5 billion, which was above consensus of $68.55 billion. In addition, the EPS outlook came in better than expected with estimates of $4.40 per share, which was up 5 cents per share from April guidance. Given the recent labeling of China as a currency manipulator and the potential of further tariffs, it will be interesting to see if Intel can meet that guidance or if they will backtrack on it when they report Q3 earnings.
Intel’s Modem Sale
Also announced during the Q2 earnings report, was the deal between Apple (NASDAQ:AAPL) and Intel. The deal was for $1 billion and Apple will be acquiring the 5G modem business from Intel.
The following slide from the Q2 earnings presentation shows Intel expects to clear $500 million in after-tax profits on this deal. In addition to receiving cash, part of the deal is that 2200 Intel employees will be joining Apple. Once the deal closes, the lower number of employees should lower SG&A and I believe will help improve margins.
Source: Intel Q2 earnings presentation
Technical Outlook for INTC Stock
Click to Enlarge The technical outlook for Intel is appealing because the stock is near the bottom end of the range it has traded in so far this year. In addition, this chart shows a long-term level of support around $43. That level is important because it is the level shares surged to at the end of 2017. Intel has tested the $43 level multiple times in the nearly two years since that time and except for a few brief exceptions has maintained a price above that level.
The bottom line is that Intel is one of the higher quality companies in the chip sector. If trade issues, etc, cause the stock to continue lower towards technical support at $43 that would be a compelling entry point. If Intel trades down to $43, Intel would be yielding nearly 3%
As of this writing, Brad Kenagy did not hold a position in any of the aforementioned securities.