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Intel Earnings Trade Insight

28-10-24

 

Intel will be closely watched this week as the company prepares to release its earnings after the market closes on Thursday.

Analysts anticipate a drop in revenue for the period, driven by decreasing demand for Intel’s PC and server chips amid mounting competition from rivals like Advanced Micro Devices (AMD) and AI frontrunner Nvidia (NVDA).

Investors will be looking for updates from Intel’s leadership on its ongoing turnaround efforts, which have contributed to a 23% recovery in its stock from early September 2024 lows. However, the stock remains over 50% below its value at the beginning of the year, reflecting the company’s continued challenges in maintaining its market position.

In the quarter, Intel partnered with IBM to introduce Gaudi 3 AI accelerators as a service on IBM Cloud, making IBM the first to deploy Gaudi 3 across hybrid and on-premise environments. This collaboration aims to help customers scale AI workloads efficiently while enhancing performance, security, and resilience. Intel also expanded its AI reach to edge devices and PCs, launching the Core Ultra 200V series processors with cutting-edge graphics and AI capabilities. Additionally, Intel extended its partnership with Amazon Web Services (AWS), co-investing in custom chip designs, including an AI fabric chip using its advanced Intel 18A process, likely boosting quarterly revenue.

Intel’s past earnings reports this year have triggered significant movements in its stock price. On 25th January 2024 its price moved 13% down; on April 25th 2024 it moved 9.5% down; and on its most recent earnings on 1st August 2024, it moved a significant 25% down. This is shown in the chart below.

 

Yearly Intel chart highlighting earnings

 

If you agree that uncertainty surrounding Intel’s earnings will increase volatility, you may consider buying a long strangle. 

Long Straddle

buy 1 Intel 08-Nov-2024 23 Call @ $1.28 = $128 debit
buy 1 Intel 08-Nov-2024 23 Put @ $1.51 = $151 debit

Trade Idea

Long Straddle

Underlying Stock Price = $22.96 (as of 28/10/2024 at time of writing)  

Total consideration of $279 (excl. fees + commissions)  

Defined risk profile – maximum loss is equal to the net option premium paid (+ fees and commissions)  

This strategy will break even if Intel stock price = $20.21 or $25.79 at expiry on 08-Nov-2024 

Maximum loss $279 (excl. fees + commissions)

The contents of this article are for general information purposes only. Nothing in this article constitutes advice to any person and any investments and/or investment services referred to therein may not be suitable for all investors. If you’re unsure whether any investment is right for you, you should contact an independent financial adviser. For more information, please see IMPORTANT DERIVATIVE PRODUCT TRADING NOTES.

Written By

Oliver Bales

Desk Broker

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