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Intel beats Q2 2017 estimates, raises FY17 outlook

The stock of chip maker Intel Corp (NASDAQ: INTC) is just about 6% below the 12-month high of $38.45.

The stock has gained about 1.5% in the past one week, after reporting better than anticipated fiscal 2017 second-quarter results. The company has also raised its FY17 revenue and GAAP earnings per share guidance.

Additionally, as discussed below, the strong revenue and earnings growth, and upbeat news regarding the acquisition of Mobileye is expected to keep the stock bullish in the near future.

The Santa Clara, California-based company reported revenues of $14.8 billion in the second-quarter 2017, up 9% from $13.5 billion reported last year. On a GAAP basis Q2 2017 net income increased 111% to $2.8 billion, or $0.58 per share, from $1.3 billion, or $0.27 per share, in Q2 2016. Last year, Intel incurred a restructuring charge of $1.41 billion.

Intel

Excluding charges, Q2 2017 net income of $3.5 billion was higher than $2.9 billion reported in the same period of 2016. On a per share basis, earnings of $0.72 reported in the June quarter were higher than $0.59 per share reported in the corresponding period last year. The Thomson Reuters’ Consensus estimate was earnings of $0.68 per share on revenues of $14.41 billion.

Segment wise, Client Computing Group revenues increased 12% to $8.2 billion. Likewise, Data Center Group reported revenues of $4.4 billion, up 9% on y-o-y basis. However, Programmable Solutions Group revenues declined 5% to $440 million. Internet of Things Group revenues and Non-volatile Memory Solutions Group reported revenues of $720 million and $874 million, respectively.

As PC shipments continue to decline worldwide, Intel is shifting its focus towards Data Center Group, which has recently seen an increase in competition from AMD’s Ryzen chips. To beat the competition, Intel has unveiled Xeon Scalable chips, referred as Purley. The company continues to generate much of its revenues from Client Computing Group.

For the third-quarter, Intel expects earnings of $0.80 per share on revenues of $15.7 billion. On the basis of overall improving demand for semiconductor chips, Intel raised its FY17 outlook to $61.3 billion, from $60 billion issued earlier. The company also raised its full-year GAAP earnings per share view by $0.10 to $2.66 per share. Adjusted earnings for FY17 is now expected to increase by $0.15 to $3 per share. The Wall Street analysts are expecting adjusted earnings of $2.86 per share on revenues of $60.22 billion.

Intel also announced that it would complete the $15 billion acquisition of Mobileye before the fourth-quarter. Thus, solid second-quarter results, increasing demand for chips, introduction of new products in the Data Center segment and upwardly revised FY17 view is expected to keep the Intel in a bullish orbit.

As shown in the price chart below, the stock is consolidating at 36 levels. The bullish momentum underlying the stock is indicated by the RSI indicator moving above the reading of 50. Furthermore, the stock is moving along the ascending channel. Thus, we can expect an uptrend in the stock of Intel.

Intel Stock Price: August 14th 2017

Intel Stock Price: August 14th 2017

To make money from the predicted upswing, we are planning to invest in a call option contract. The investment would be blocked when the pair trades near $36 in the US equity market. A date around August 22nd would be selected for option expiry.


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