Yes, I still like Intel (INTC) , and I even still like CEO Brian Krzanich as its leader. And no, I haven't forgotten about its recent chip flaws, the 35 or so lawsuits surrounding them, nor the guarded way in which the news of problems came out.
I also noticed the U.S. Securities and Exchange Commission's new rules against CEOs and directors trading shares of their company's stock between the time a firm learns about a security issue and the issue's disclosure to the public. That said, I take you back to late January, when Intel beat fourth-quarter earnings-per-share expectations by 21 cents.
The firm also bested revenue projections by $760 million, which was good enough for 4.3% in year-over-year growth. Additionally, Intel boosted its dividend by more than 10% and raised 2018 guidance above consensus for both earnings and revenue.
Intel is also successfully working on reducing costs. Operating expenses fell down 4% year over year for the quarter and 9% lower for the full year. Expenses came to 34% of revenue in 2017, but the firm has stated a goal of reducing that to 30% by 2020.
Some of that will come from reduced U.S. corporate taxes. For 2018, Intel expects to have a 14% effective tax rate. For 2017's fourth quarter, that rate came to 19.8%.
Nomura reiterated a "Buy" rating on the name in late February, boosting its price target to $60 from a previous $50. Then Citigroup made the stock a "Top Pick" and reiterated a $58 price target. Citi analyst Christopher Danely projected 2018 EPS above the midpoint of Intel's own increased guidance.
And just last week, the firm announced an expansion of its partnership with China's Tsinghua Unigroup, with plans to provide that concern with NAND memory chips. Intel currently ranks just sixth globally in NAND-chip production, so this move certainly helps open up access to Chinese markets (trade wars excepted).
I sold a little less than a third of my long position in Intel after some of the recent negative chip news broke, but that was a defensive sale. I still like the stock in general, and the name remains a core position for me.
Let's take a look at the stock's chart. Two things that I immediately see when I look at Intel's chart are both a triple bottom and two double tops (denoted with blue lines below):
How interesting is that? Those bottoms have absorbed several high-profile negative news stories, as well as a volatility-inflicted "flash correction" and the current jitters over a trade war and how that would impact U.S. semiconductor firms' supply lines.
While the stock's Chaikin Money Flow (marked "CMF" above) hasn't yet gone green off of the stock's most recent shakedown, any negative showings for this indicator have tended to be brief.
We also have a suddenly positive daily Moving Average Convergence Divergence (MACD) that sports a recently bullish crossover, as well as the fact that all of the exponential moving averages (EMAs) are currently in positive territory.
The Fibonacci Fan (the diagonal orange lines above) also paints an interesting picture. See that third bottom where support finally arrived during the flash correction? It's not precise, but precision is very tough at times like that. Still, that support did coincide with a convergence of Intel's 100-day simple moving average and the first line of the stock's rising Fib support.
Obviously, Chinese retaliation to Trump's steel tariffs could upset the apple cart. But if retaliation is slow to come (or if there's already some kind of deal with Chinese President Xi, who likely wants to reduce pollution in some cities), then the model above has a strong likelihood of remaining intact.
Personally, I'm going to undercut both Citi and Nomura just a bit and give Intel a $57 price target. I'm likely to add at $44 (vs. the $49.98 Intel closed at on Friday), and will be sure to add should there be fourth test of the stock's $42 recent bottom. For those about to ask, $44 puts expiring on April 20 paid 53 cents on the way out on Friday night.