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HOT SHOTS: Is Intel a Buy?
By Jody Osborne, Optionetics.com
6/8/2004 4:45:00 PM

http://www.optionetics.com/articles/article_full.asp?idNo=10528

The stock market has been moving higher the past month, but volume has been light. On Monday, tech stocks saw a very strong move after positive economic data on the employment situation the prior Friday. Tuesday, stocks started lower, but managed to rise throughout the session to ultimately finish positive. The Philly Semiconductor Index ($SOX) has been moving higher, but has now ran into resistance at its 200-day moving average. If broken, which seems likely, chip stocks might see a significant jump in price. When chip stocks rise, it usually has to be led or at least accompanied by Intel (INTC).

Intel Corporation designs, develops, manufactures and markets computing and communications products at various levels of integration. It has three product line operating segments: the Intel Architecture business, which is composed of the Desktop Platforms Group, the Mobile Platforms Group and the Enterprise Platforms Group; the Intel Communications Group [ICG], and the Wireless Communications and Computing Group [WCCG]. The Intel Architecture operating segment's products include microprocessors and related chipsets and motherboards. ICG's products include wired Ethernet and wireless connectivity products, network processing components and embedded computing products. WCCG's products include flash memory, application processors and cellular baseband chipsets for cellular handsets and hand-held devices. The Company's products are sold directly to original equipment manufacturers [OEMs], and through retail and industrial distributors, as well as reseller channels throughout the world.

Last week, Intel held its mid-quarter update and this led to higher prices for the stock. The company raised earnings estimates and had positive things to say about the future. However, this good news still hasn’t been enough to push the stock through resistance just below $30 where the 200-day moving average resides. If the SOX is able to push through, this might provide the necessary strength that Intel needs to make a similar push.

Intel has a P/E ratio below 30, which is below the industry average and it is a popular holding for institutions. This means that when volume does return, Intel could be a major participant in a nice rally. Intel has a strong standing within its industry and is always looking to expand its abilities. As a result, the stock is often a core holding for long-term investors. With implied volatility at multiyear lows right now on Intel options, traders might want to look at buying LEAPS or entering longer-term bull call spreads on this chip giant.


Jody Osborne
Senior Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
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