Intel Corp. (INTC) is set to release earnings on Thursday, July 23, after the market close. But investors are nervous. As a result, INTC is way off its highs, and put option premiums are high. Short-sellers can make a one-month 4.5% yield at an INTC put strike price that is 15% lower.
INTC closed at $95.04, down 2.0% on Friday, July 17. It's down from $139.53 on June 30 (-31.9%) and $140.94 on June 22 (-32.6%) in the past two weeks.
Netflix Tanks on Lower Margins and Flat Outlook – Time to Buy NFLX?
Huge, Unusual Intel Options Volume Today Ahead of Earnings This Week
Option Volatility And Earnings Report For July 20-24
Tired of missing midday reversals? The FREE Barchart Brief newsletter keeps you in the know. Sign up now!
This could be because some investors are wary of Intel's upcoming earnings release. Expectations are for lower earnings per share (EPS) at 22 cents (normalized), below last quarter's $0.29 EPS, according to Seeking Alpha.
Moreover, Intel continues to generate negative adjusted free cash flow (FCF). The market wants to see that become positive, preferably sooner rather than later. But that may not happen in Q2.
For example, last quarter (Q1), Intel generated just $1.096 billion in operating cash flow, but had $4.96 billion in capex. That resulted in a negative $2.2 billion adjusted FCF. That represents an outflow of cash from Intel – not what the market wants to see.
The only way this turns around is if revenue rises dramatically. That could be possible over the next year, given the huge demand for Intel chips from AI-related demand and hyperscalers' ever-increasing purchases.
In fact, management said last quarter they still expect to generate positive adj. FCF this year, exclusive of a large fab buildout (although I am not sure how they will factor that out).
In my April 26 and June 23 Barchart articles, I showed how this could occur. I projected a price target (PT) of $147 per share by next year. This was based on analysts' revenue forecasts for 2027 ($65.45 billion) and on an 8.5% FCF margin ($5.55b FCF) and a 0.75% FCF yield, or a $740 billion fair market value, or FMV.
Moreover, since then, analysts have raised their revenue estimates. Now, the average 2027 revenue estimate is $66.17 billion. And, for 2026, they forecast $58.89 billion. (The next 12 months (NTM), the average is $62.53 billion.)
As a result, 2027 FCF could be $5.62 billion, and using a 0.75% FCF yield metric (i.e., multiplying FCF by 133.3x), the FMV is $749 billion. That is 56.8% higher than Intel's market cap of $477.67 billion today. That implies a price target of $149 per share (i.e., 1.568 x $95.02).
Source: Yahoo Finance Top News — This article was automatically imported from the source. Read full article at original source →
