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TheStreet Open House

Intel Into Earnings Is a Strong Buy

The daily 200-period moving average is falling, a technical bearish indication, however, on the weekly chart, the 200-period moving average continues to remain bullish.

For long-term buy-and-hold investors, the dividend is king. Intel is dividend royalty and currently offers a 4.2% yield. A large yield doesn't impress me when the dividend is at risk of vanishing, but even if Intel's profits are in line with estimates, the payout ratio is under 50%.

I don't know if Intel will beat this report's average estimate, but the smallest beat in the last four quarters was 3.8%. Will Intel beat every quarter in the future? Probably not, but the dividend appears solid. The average analyst target price for Intel is $23.05.

Short sellers are among the brightest and most informed market participants, and if they turn sour on a company it is likely for a valid reason. If the short interest ascends above 5%, you may want to scrutinize changes within the space. Otherwise, the prevailing 4.6% of the float short is relatively meager and not a major concern.

Intel's competition comes from Advanced Micro Devices (AMD), Nvidia (NVDA), Qualcomm (QCOM), Texas Instruments (TXN), Seagate (STX) and Western Digital (WDC).

Seagate and Western Digital may not come to mind first as competitors, but don't discount the storage space. Intel produces consumer and enterprise level solid state storage devices. As storage chip prices continue to fall, solid state storage will take market share away from mechanical storage.

I am very bullish on Seagate and have written about Seagate many times in 2012. My most recent article was 4 Rising High-Yield Dividend Stocks . Better still, in Five Oversold Stocks: One Is a Strong Buy, One Is a Lotto Ticket , I called Seagate a buy, right at the bottom.

AMD is the first company I think of as the main competitor of Intel, and between the two, I like Intel better. I still like AMD, but dollar for dollar, Intel is a better buy at the current share price level. When share prices fall much under $5, their price/value is often skewed due to market sentiment.

As the mobile space grows, some analysts believe Nvidia, Qualcomm and TI will continue taking processing market share at the expense of Intel and AMD. I see that as a shorter-term trend and expect Intel (and AMD) to make significant gains soon. To believe otherwise requires a theory that Intel is simply going to throw its hands in the air and scream surrender.

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