Intel Rallies to 52-Week High

Dow component Intel Corp. (INTC) is trading at a 52-week high in Wednesday’s pre-market session after issuing upside Q1 earnings-per-share (EPS) guidance and announcing an estimated $20 billion investment in two new fabrication facilities in Chandler, AZ.   Investors chose to ignore downside guidance for fiscal year 2021, with newly-projected non-GAAP revenue of $72.0 billion lower than prior estimates of $73.03 billion.

Adding Fabrication Capacity

The company cited strong demand for notebook computers in the quarterly call but tempered full year guidance due to industry-wide component shortages. It also announced the establishment of Intel Foundry Services (IFS), which intends to become a major supplier of U.S. and Europe-based foundry capacity, as well as a partnership with International Business Machines Corp. (IBM) to create next-generation logic and packaging technologies.

Needham analyst N. Quinn Bolton raised his target to $74 on Wednesday, noting that Intel “reiterated its plan to build the majority of its products in-house while also increasing its use of third-party foundries. With most of the world’s leading edge foundry capacity now concentrated in Asia, Intel also launched Intel Foundry Services (IFS) to address the industry’s capacity constraints and need for more geographically balanced manufacturing capacity”.

Wall Street consensus remains skeptical despite the news, with a ‘Hold’ rating based upon 15 ‘Buy’, 1 ‘Overweight’, 16 ‘Hold’, and 2 ‘Underweight’ recommendations. More importantly, 8 analysts recommend that shareholders close positions and move to the sidelines. Price targets range from a low of $40 to a Street-high $90 while the stock is set to open Wednesday’s session on top of the median $65 target. This mid-range placement suggests Intel is fairly-valued at this time.

Wall Street and Technical Outlook

The stock has struggled since topping out above 57 in June 2018, oscillating in an expanding wedge that carved slightly higher highs in 2019 and the first quarter of 2020. Support at a shallow trendline in the 40s has been tested four times during this period, generating high volatility and poor returns. The current uptick has now stretched within four points of resistance at January 2020’s all-time high at 69.29, telling prospective shareholders to keep their powder dry, due to adverse reward-to-risk.

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Disclosure: the author held no positions in aforementioned securities at the time of publication.