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Stocks  | May 1, 2020

A lot of investors have had their eye on Intel (NASDAQ:INTC) lately. Not only does it tend to trade alongside Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD), which are also spotlight-type stocks, but INTC stock is a major technology player.

With its $261 billion market cap, Intel is no speck in the tech space. Further, it’s the sixth-largest weighting in the PowerShares QQQ ETF (NASDAQ:QQQ) by company, and the seventh-largest weighting by stock (the QQQ ETF allocates two equal positions to both classes of Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) stock).

In any regard, Intel stock is certainly worth paying attention to and its post-earnings action was noteworthy. Let’s take a closer look.

Trading INTC Stock

Intel beat on earnings and revenue expectations. Profit of $1.45 per share beat estimates by 18 cents, while revenue of $19.8 billion crushed expectations by more than $1 billion. It was a nice beat, even if expectations were reduced coming into the print.

Guidance could have been a bit stronger though, which many attribute to the post-earnings sell-off.

However, that sell-off was met by buyers, as the stock went on to recover several key technical areas. INTC stock fell about 6% after reporting earnings, dropping it below the 50% retracement, 50-day moving average, 20-week moving average and the $56 level.

After opening lower on the day, bulls surveyed the news and decided that the results really weren’t that bad. They quickly bid the stock back over these key areas and Intel actually closed higher on April 24.

So what now?

The 50% retracement and $56 level held as support. That’s a key level to keep in mind, because we now know buyers are willing to step in at this point. Below it puts a pullback down to the 50-week moving average in play, as well as the 38.2% retracement near $53.30. Below that and $50 is on the table.

We went to see Intel continue to hold the 20-week moving average near $59. Above keeps a breakout over the 61.8% retracement and $60 level in play. So far, buyers have been unable to push INTC stock up through $62. If they can do so now with earnings out of the way, shares may fill the gap up toward $64. Above that puts $68 in play.

Here’s the technical bottom line: See how Intel does with the $60 to $62 area on the upside and the $56 level on the downside.

Valuing Intel

Earlier I mentioned that guidance was seemingly an issue with Intel investors after the company reported earnings. I went through the report and didn’t think there was enough negativity to justify a 6%-plus sell-off in the stock, particularly after shares fell almost 2% in the regular-hours trading session before the report.

The company’s guidance for next quarter included revenue of roughly $18.5 billion, topping consensus estimates of $18.1 billion. However, management saw $1.10 per share in earnings, short of the $1.17 consensus. If this was the fly in the ointment, it seemed like the bears would need more than that.

A slight earnings shortfall on guidance, when revenue was above estimates and after a top- and bottom-line beat? All this with INTC stock still almost 15% off the highs seemed underwhelming from the bears’ perspective.

Of course, the quarter wasn’t necessarily a blowout and if the indices were under intense pressure like they were in March, this quarter wouldn’t convince me to chase Intel at any price. But it was far from a disastrous quarter.

Because Intel beat current estimates and was mostly in-line with next quarter’s estimates, that eases concerns for 2020. In other words, full-year estimates may not be as inaccurate as one might have assumed a few weeks ago.

Under that consideration, we’re talking about roughly flat growth in 2020 and a stock that trades at less than 12.5 times this year’s earnings estimates. Throw in the 2.25% dividend yield that INTC stock pays – versus a 10-year Treasury yield of just 0.63% – and investors could do a lot worse than buy Intel. Especially when the technicals are still aligned.

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