Could Intel Stock Reach New Highs?


Dec. 23 2019, Updated 5:58 p.m. ET

Intel Corporation (INTC) stock closed trading at $58.95 on December 20, up 1.71% from the previous trading session. This performance lagged behind the S&P 500’s (SPX) 0.49% increase on the day. Meanwhile, the Dow Jones Industrial Average (DJIA) rise 0.28%, while the tech-heavy Nasdaq gained 0.42% at the same time.

Since my last article about INTC, Intel Stock Could Jump after Earnings, the stock has risen from $52.45 to $58.95 on December 20. This difference represents a stock price appreciation of about 12.4%.

Last week, Intel stock saw several bullish bets from options traders. Moreover, the stock is approaching its 52-week-high technical resistance level. So, let’s take a look at its valuation metrics, technical charts, and options trades to see whether the stock can reach new 52-week highs. 

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Why Intel stock is still attractive from a value standpoint

Intel stock is trading at 13.51x its fiscal 2019 earnings estimates of $4.36. Having said that, Intel looks undervalued compared to the sector’s median forward PE ratio of 24.02x. If Intel starts trading closer to the semiconductor sector’s median levels, the price for Intel stock could be around $104.70, which represents a gain of 77% from the current levels.

In addition, Intel trades with a PEG (price-to-earnings-growth) ratio of 0.41x. This suggests that the stock price is currently discounted, considering a PEG ratio of 1.0x–1.5x for a fairly valued stock.

INTC and the ascending triangle

Currently, Intel stock is floating near its 52-week high level, which comes in at $59.59. Moreover, the stock is currently for forming a bullish pattern known as the ascending triangle. This means that the stock would likely rise in the near term.

In addition, its volume has increased significantly during the last trading session, which is a positive sign in terms of a possible breakout.

Let’s take a look at the directorial movement index (or DMI), which measures momentum by comparing successive day highs and lows. In our case, it has started to send a bullish signal since Wednesday.

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Betting on a bullish breakout for Intel stock

Some options traders are betting that Intel stock continues to rise in the coming weeks and months. The open interest levels for September 18, 2020, call options with the strike price of $85.00 surged significantly this week. According to data from Barchart.com, the open contracts increased by about 15,000 contracts to about 15,331. The contracts were traded at $0.22 on Friday.

So, the open interest represents a total value of about $330,000. For the buyer of the $85.00 calls to earn a profit, Intel stock would need to rise to around $85.22. That’s a gain of about 44.06% from the current levels.

Finally, the open interest levels for January 17 $60.00 calls have seen an increase over the past week. According to Barchart.com, the open contracts increased by 2,185 contracts to about 68,913. This is a large wager considering the total value of the transaction of about $5 million. For the buyer of the $60.00 calls to earn a profit, Intel stock would need to surge to $60.74.

Analysts’ coverage and target prices for INTC

For the most part, Wall Street analysts have upgraded Intel stock over the last six months. The consensus price target was $56.37, which represents a 4.38% downside. You can refer to MarketBeat for a detailed breakdown. This weak confidence generally comes from Intel’s problems with the 10nm processor. According to TipRanks, INTC is a “hold” with an average price target of $57.29, representing a 2.82% downside.

If you’re interested in more analysis like this, please check out Why AAPL Stock Could Take a Hit in 2020, General Electric Options Traders Betting on a Bullish Jump, and Is Microsoft Stock Going to Surge Higher?


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