Buy More Intel Shares on Post-Earnings Selloff
If you liked Intel (INTC) - Get Report stock at around $36, you should love it near $34.
Although the company's second-quarter profit drop was a surprise, the company's long-term story has not changed. The profit decline was related to restructuring costs, making it a one-time event.
Now is the time to buy more Intel shares, not sell them. If you followed my buy recommendation on April 18, your position should still be up about 9%.
On June 13, the chart told us that Intel's trend would support a rise to $35. The stock almost reached $36 on Wednesday. That strategy still makes sense now.
Take a look at the chart, courtesy of TradingView.
Intel shares closed on Wednesday at $35.69, up 1.5%. This puts the stock up 3.6% year to date, compared with a 6.3% rise in the S&P 500 (SPX) . It declined nearly 3% in premarket trading Thursday following the earnings announcement, just about erasing the company's year-to-date gains. That makes the stock, which trades at just 14 times earnings estimates of $2.40 per share, even more attractive.
Despite the pullback, the trend is still bullish. Intel made a strong run heading into the report, rising 30% from its January low. The selling is a function of the high expectations inherent in such a strong move, which included a post-Brexit rise of about 17%. Analysts give Intel a consensus buy rating.
The question is, where does Intel go from here?
Thanks to the stock making higher highs and higher lows, the chart shows that the near-term resistance level is now at $37, or about 7% higher than premarket trading levels. If that level is reached, the next target would be $38.30. At the same time, $33 per share is likely the new base, which has moved higher from $31.60.
The stock's risk-vs.-reward profile has gotten better even with this recent pullback. Intel's 3% annual dividend yield adds to the appeal; that's one percentage point higher than the dividend on the average stock in the S&P 500 index. At cheaper levels, Intel remains a must-own stock.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.