Option Trade 
Intel Corporation (NASDAQ:INTC) Calls 
Wednesday, 20th July, 2016

** OPTION TRADE: Buy the INTC SEPT16 2016 35.000 call at approximately $1.10. Place a pre-determined sell at $2.20.

Note: No protective stop losses added -- but if you wish to do so make it $0.45.

by Ian Harvey

July 20, 2016

Intel Corporation (NASDAQ: INTC), a designer and manufacturer of digital technology platforms, will release its second quarter 2016 earnings on July 20 after market close. Analysts are estimating that on average Intel's EPS will be $0.53 on revenue of $13.54 billion. In the first quarter Intel's EPS came in at $0.54, beating analysts' estimates significantly, on revenue of $13.8 billion.

This second quarter revenue could surprise the Street.

If the client computing group delivers revenue close to $8 billion, which isn’t impossible, Intel’s overall revenue could exceed $14 billion.

In that case, shares of the company should rally post earnings and gradually advance toward $40.

The company's client computing group revenue showed a sign of stabilization driven by better than expected PC and mobile processor sales in the first quarter. For the second quarter, expect that if Intel's revenue exceeds $14 billion, its shares will march toward $40.

Also, Intel Corporation is seeing favorable earnings estimate revision activity as of late, which is generally a precursor to an earnings beat. After all, analysts raising estimates right before earnings-with the most up-to-date information possible-is a pretty good indicator of some favorable trends underneath the surface for INTC in this report.

In fact, the Most Accurate Estimate for the current quarter is currently at 55 cents per share for INTC. This suggests that analysts have very recently bumped up their estimates for INTC, giving the stock an Earnings ESP of 3.77% heading into earnings season.

INTC has moved up more than 10% since the Brexit saga, which hit the capital markets last month. With help from one or more positive developments, the chip maker has been able to gain investors’ confidence. Based on all these developments, it is expected that the stock will hit a new 52-week high soon.

There have been several positive catalysts for Intel, and one of the latest developments is that it won a contract to supply chips for the iPhone 7, which have helped greatly. Also many analysts added the chip maker to their bullish books, helping it add to its gain.

It is now believed that the chip maker is now in the same position as it was in 2001. Optimism surrounds the company as many see that cloud computing as the next big thing and that the chip giant is poised well to benefit from this. Five years from now, Intel could grow by 15% per year with help from the growth of smartphones and the internet.

Also, bullish recommendations from numerous brokerage houses could act as positive catalysts going forward. Popular research firms like RBC, Mizohu and Argus have raised their price targets and ratings on the chip maker.

Also, BofA/Merrill Lynch very recently mentioned that Intel Corporation is set to turn around its performance, as it is likely to boost sales and earnings per share (EPS) by 4% and 10% per year, respectively, after five years of muted 1% growth in both metrics. The acceleration and turnaround is driven by shift in the mix toward growth products, such as cloud networking, along with a headcount cut of almost 11,000 employees.

Intel Corp. has a 12 month low of $24.87 and a 12 month high of $35.59. The company has a market cap of $165.60 billion and a P/E ratio of 14.98. The firm has a 50-day moving average price of $32.43 and a 200 day moving average price of $31.29.

Intel Corp. had its target price boosted by equities researchers at Canaccord Genuity from $38.00 to $40.00 in a research report issued on Monday. The brokerage presently has a “buy” rating on the chip maker’s stock. Canaccord Genuity’s price objective would suggest a potential upside of 14.06% from the company’s previous close.

Also, several other equities research analysts have recently commented on the company.

• Wells Fargo & Co. reiterated a “buy” rating on shares of Intel Corp. in a report on Wednesday, April 20th.

• B. Riley reiterated a “buy” rating and issued a $40.00 target price on shares of Intel Corp. in a report on Thursday, April 14th.

• JPMorgan Chase & Co. lifted their target price on Intel Corp. from $38.00 to $39.00 and gave the company an “overweight” rating in a report on Wednesday, April 20th.

• Finally, Credit Suisse Group AG reiterated a “buy” rating and issued a $40.00 target price on shares of Intel Corp. in a report on Friday, April 1st.

Four research analysts have rated the stock with a sell rating, fifteen have issued a hold rating and thirty have assigned a buy rating to the stock. Intel Corp. presently has an average rating of “Buy” and an average target price of $36.22.

Harvey’s Options Volatility Indicator


Of all the mega-cap tech stocks, INTC is quietly having one of the best years, rallying 24% off the February lows. INTC used the recent market strength to break through resistance at $33, and is now headed towards $35.50. If it can beat this next test, it can easily retest the $38 level and make this trade a big winner.

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

** OPTION TRADE: Buy the INTC SEPT16 2016 35.000 call at approximately $1.10. Place a pre-determined sell at $2.20.

Note: No protective stop losses added -- but if you wish to do so make it $0.45.

”Success is simple. Do what's right, the right way, at the right time.”

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Options traders win because they are successful.

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