Is Intel’s (INTC) Resurgence The Real Deal?
PC chip powerhouse, Intel (INTC), is making waves today with the shares spiking 7% higher. It’s the first time in a while the chipmaker has been in the news for positive reasons.
Basically, INTC is getting lots of investor love after raising forecasts. The company raised its revenue guidance for the second quarter. It estimates sales from $13.4 billion to $14 billion. That’s up from the previous $12.5 billion to $13.5 billion range.
The bump in guidance comes from unexpected, renewed demand for business PCs. Keep in mind, INTC processors are in roughly 80% of the world’s PCs. Still, the news comes as a surprise because PC sales have been on the decline for years.
As most of you are already aware, PCs have given way to smartphones and tablets. Many analysts believe the era of the PC is over.
As such, the renewed demand Intel is seeing certainly comes as a surprise.
So what’s driving the unanticipated demand?
Most importantly, it’s Microsoft (MSFT). You see, MSFT is ending support for their widely popular Windows XP. Companies are finally being forced to upgrade their systems in order to run the more robust, modern versions of Windows.
Here’s the thing…
This is going to be temporary boom in business PC sales. Once this massive system refresh is over, I don’t see PC demand remaining strong. In other words, I think INTC’s optimism will be short-lived.
Unless the chip-making giant can diversify its revenue streams more effectively, I just don’t see the company as a good play on growth. (I’m not writing off the stock as a reasonable income investment, just as a growth stock.)
Of course, there are multiple ways savvy options traders can take advantage of INTC’s lack of long-term growth potential. The most straightforward way would to be to buy LEAP (long-term) puts. A more advanced strategy would be to sell medium to longer-term call spreads.
In addition, I don’t believe Intel has substantially more upside after the big jump in the share price today. But, there’s probably a floor on how far the stock will fall in the short-term.
With that being said, selling straddles/strangles could be a good short-term strategy on the stock. Keep in mind, straight up straddle and strangle selling carries a heavy amount of risk. Using butterflies or condors is a safer strategy in this situation but contains less upside.
Yours in Profit,
Gordon Lewis
Category: Breaking News
