Intel Corporation (Nasdaq: INTC) shares have slightly outperformed the broader market in 2014, up a modest 3% so far year to date. The stock has traded in a 52-week range of $21.42-$27.12, having hit its low of $23.05 on February 5, the same time as the broader market. The stock ticked up $0.38 (1.45%) in Monday’s session.
Intel Corporation is scheduled to report earnings after the closing bell in Tuesday’s session. Analysts are projecting EPS of $0.37 per share on overall revenue of $12.81 billion. Historically, INTC share have not been prone to huge moves following earnings announcements – the stock has moved an average of 2.7% over the past 8 quarters. Shares also tend to sell off – the stock has fallen following earnings calls 2 of the past 4 quarters, and 5 of the past 8.
Like other microprocessor manufacturers, Intel is being hit hard by consumers move away from the PC. Management hopes to offset this revenue with gains in the tablet market, specifically, low end tablets. This means emerging markets like China will be increasingly important for Intel going forward. The company went to so far as to host its developer forum in Shenzhen this year, and has reportedly invested $100 million in an ‘innovation fund’ in the region. Clearly, management views this region as critical to its success going forward, despite stiff competition from more nimble companies such as ARM Holdings (ARMH).
As with any earnings call, guidance will be important. Investors will also be looking to hear of new partnerships in the China region. The April at-the-money straddle, expiring Thursday, is implying a move of about $0.95, or 3.7%.
I personally would not look to get long INTC into earnings, and would look to buy the INTC April Weekly 26.5-25.5 for around $0.28. This offers a favorable risk-reward setup, potentially paying about 3:1 on my money. Given the historical movement, fading the earnings move wouldn’t be a bad play either, but the cost of commissions might make some traders wary of putting on an Iron Butterfly (selling the straddle and buying an out-of-the-money put and out-of-the-money call to limit risk potential).
