Many investors have written off Intel Corporation (Nasdaq: INTC) this year. The company has struggled to keep up with a much more nimble Advanced Micro Devices and, for the first time in nearly a decade, Intel is losing market share.
Given INTC stock’s activity this week, investors may want to reconsider their bearish positions on the shares. In fact, Intel is on the move again.
After falling more than 19 percent since their June high, Intel shares appear to have finally put in a bottom. Lifted by a broad rally in the tech sector, INTC stock broke out of a down-trending price channel this week.
Intel shares surged more than 4.4 percent this past Friday, as the stock finally showed some serious signs of life. INTC stock took a brief breather on Monday, only to resume leadership on the Dow Jones Industrial Average on Tuesday with a 3.5 percent gain.
The rally now has INTC stock trading north of its 50-day simple moving average, which should bring more technical buyers to the table.
Intel Stock Defies Market Sentiment
What’s more, this recent surge in Intel stock comes despite negativity from the brokerage community. Specifically, Barclays downgraded INTC stock to “underweight” from “equal weight” on Monday.
However, the brokerage firm cited Intel’s widely-know 10nm chip production issues as its reason for the downgrade, lessening the impact.
Additionally, Intel CEO Bob Swan backed the company’s 2018 revenue outlook despite production and supply concerns. In an open letter, Swan said Intel was lifting CapEx to boost 14nm chip manufacturing.
Overall, about 23 of the 41 analysts following INTC stock rate the shares a “buy” or better. This reading is down sharply from last year’s bullish outlook on Intel.
But this year’s negativity may have been overdone. INTC is trading about 14 percent below the 12-month average consensus price target of $55.26. In other words, Intel shares have some room to rebound.
Options traders certainly think so. On Tuesday, options volume spiked to 290,000 contracts on INTC stock, nearly tripling its daily average volume. Calls, or bets that Intel would rally, made up 68 percent of that volume.
The Bottom Line
Intel has had a rough couple of months. And it doesn’t help that AMD is stealing the limelight with Wall Street’s semiconductor bulls. However, Intel has been here before. The company has the market weight to pull through this rough patch and remain a solid long-term investment.
The stock’s rally in the past week shows that value investors are beginning to make a move on INTC stock. Technical traders are sure to follow now that the shares have reclaimed their 50-day moving average.
The only hurdles left are Intel’s 200-day moving average at $49 and potential price resistance near $50. Should this recent contrarian rally for INTC stock continue, we could see the shares challenging new highs by the end of 2018.
