Amid a slightly downcast environment in the equities sector, technology giant Intel (NASDAQ:INTC) manages to continue impressing market observers. On Thursday, INTC stock popped higher following news that Mizuho analysts upgraded their rating to “buy” from “neutral.” Still, the security has been on a run, moving up over 17% in the trailing month, likely on short covering.
To be sure, the analyst upgrade almost certainly added fuel to the fire, with Mizuho also raising its price target to $50 per share, an increase of $13. According to an article by Investing, the Wall Street experts articulated five main reasons behind their bullish pivot:
- Mizuho analysts posit that Intel’s product roadmap for Compute and Data Center (DC) in 2024 surpasses that of its competitors and aligns favorably with its historical releases.
- The analysts foresee a positive upswing in the PC and Data Center sector in 2024, which could substantially contribute to Intel’s potential expansion.
- The separation of Altera FPGA is viewed as a considerable enhancement, with an estimated added value of $17 per share.
- 2025 is highlighted as a pivotal transition year, particularly in relation to the IFS/18A, an initiative to introduce advanced semiconductors rapidly.
- According to the analysts, Intel’s implied sum-of-the-parts (SOTP) value in “2024-25E” is approximately $84 per share.
Also, Mizuho mentioned that INTC stock trades at a comparative discount to rivals Advanced Micro Devices (NASDAQ:AMD) and Nvidia (NASDAQ:NVDA).
Positive Earnings Sparks Short Covering Fervor on INTC Stock
Again, while INTC stock likely benefited from the Mizuho upgrade, the root of the robust upswing in recent sessions may center on short covering motivations. And that incentive stemmed from a surprisingly upbeat third-quarter earnings report and Q4 forecast.
According to MarketWatch, on Oct. 26, Intel posted a net income of $297 million or 7 cents per share. While these figures were noticeably down from the year-ago period, the company earned 41 cents per share on an adjusted basis. In contrast, covering analysts anticipated a profit per share of 22 cents. Likewise, while revenue dipped on a year-over-year (YOY) basis to $14.2 billion, the consensus called for $13.6 billion.
However, the spotlight belonged to the Q4 guidance. Intel anticipates that sales will land between $14.6 billion and $15.6 billion. That’s noticeably above the consensus estimate of $14.4 billion. Also, management models for 44 cents in adjusted earnings per share. This contrasts nicely with the analysts’ view of 33 cents.
Subsequently, the move caught many bearish speculators off guard. Mainly, several institutional traders appear to have sold (written) call options prior to the earnings disclosure. For instance, Fintel’s options flow screener shows that a major entity (or entities) on Oct. 23 sold 20,232 contracts of the INTC Jan 19 ’24 40.00 Call, collecting a $1.86 million premium for underwriting the risk.
However, INTC stock now stands at $42.83. In order to cover this and other sold calls, call writers will likely have to buy the underlying security. That’s applying upward pressure on Intel shares, commonly known as a gamma squeeze.
Why It Matters
Although Mizuho may be warming to INTC stock, most analysts remain on the sidelines, pegging shares a hold. This assessment breaks down as five buys, 18 holds and four sells. Also, the average price target sits at $37.39, implying a 13% downside risk.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
