It is the start of another beautiful week and I am excited about the possibilities that options provides us to outperform the general market this week. We will start our trading activities by looking at potentials in the options of Intel Corporation (NASDAQ:INTC). Intel is without any doubt one of the leading manufacturers of microprocessors in the world. Intel designs and manufactures integrated digital technology platforms consisting of a microprocessor and a chipset.
Intel is set to deliver its third quarter earnings in about two weeks from now on October 14 and I strongly believe that today is the best day to make option plays on the stock before the earnings release. It might interest you to know that Intel delivered second quarter earnings that beat the analyst expectations and it gave an optimistic guidance for the third quarter.
Why Intel is Set to Surge in the Next Two Weeks
Strong Earnings Performance
The Q3 guidance presupposes that we can expect to be pleasantly surprised when Intel releases earnings in the next two weeks. The historical earnings performance of a company do not always give a verdict on what to expect from the company in the coming quarter; nonetheless, historical earnings performance of tech stocks tend to rhyme in the second and third quarters.
In the second quarter, Intel reported revenue of $13.83B to mark an 8.4% sequential growth and an 8.0% annual growth. The reported revenue also beats the guidance of $13.00B (+/- $500M) and beats the consensus estimate of $13.62B. The company also reported earnings of $0.55 per share to mark a 45% sequential improvement and to beat the consensus estimate of earnings of $0.52 per share.
For the third quarter, Intel’s guidance on revenue stands at $14.4B (+/- $500M) to mark a 4.1% sequential increase and a 6.8% year-over-year increase. The revenue guidance also beats the consensus estimate revenue of $14.0B. I strongly believe that Intel will deliver another impressive quarter in the next two weeks to send the stock surging to new highs.
2. Attractive Dividend History
The second reason why shares of Intel are set to surge within the next two weeks is that the company is one of the few dividend champions in the tech industry; hence, income hunters are likely to sustain the buying action over the course of the next two weeks. For one, Intel has been paying a dividend for more than 20 years and the company has been systematically increasing its dividend over the last 10 years.
Intel has declared the payment of another quarterly cash dividend of 22.5 cents. However, critics might opine that Intel has gone through 11 quarters without a dividend increase. The fact that Intel has not increased its dividend in almost three years suggests that the Intel will be under pressure to redeem its image by raising its dividend in the next couple of quarters. Hence, income quarters are likely to stay on the stock in anticipation of a dividend increase.
3. Focus on China for Mobile Growth
In all honesty, Intel has been having a hard time growing its Mobile & Communications Group, which generated less than 1% of revenue in the second quarter. However, Intel is set to make another go at mobile through a $1.5B investment in Tsinghau Unigroup for the facilitation of partnerships with Spreadtrum Communications and RDA Microelectronics. The deal is still in the elementary stages; yet, it is not too soon to conclude that it might be Intel’s pass to compete effectively with Qualcomm and ARM.
How to Trade INTC Options
Shares of Intel Corporation are trading up nicely today as the stock has already gained 1.59% to $34.81 as at 1:05PM EDT. I strongly believe that the stock has enough potential to surge beyond the current 52-week high within the next 4 weeks. I recommend buying the INTC Jan 2015 35.000 call (INTC150117C00035000) at an asking price of $1.64.
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