Get Paid to Wait with Intel Stock (INTC) Put Options – Yahoo Finance
As investors already know, flag-waving Intel Corporation (INTC) has become the black sheep of the semiconductor family. Intel has been slow to transition from CPUs to GPUs, losing industry leadership to Nvidia (NVDA) and longtime competitor Advanced Micro Devices (AMD). That fact is clear given that NVDA stock's market capitalization is currently about 40 times that of Intel.
Intel's low stock price and the company's new leadership, coupled with sprinkling of acquisition interest since Intel's dark days in August, have many investors optimistic about an upturn in Intel's valuation. may be doing. At the moment, I prefer to wait, but would like to receive income from my commitment to purchase INTC stock at a lower price. Officially, I'm giving INTC a Hold rating.
Although the company's market capitalization declined even more, the 26% plunge in Intel stock on August 1, 2024 was the largest percentage decline in at least a decade. There were also business days before and after that when losses exceeded 5%. The company has certainly disappointed investors on other occasions, but there was little appetite from contrarian investors to buy the stock after it released Q2 2024 results. The relevance of Intel's overall business had been questioned by some analysts as profit margins fell sharply and the company announced plans to cut jobs.
The company also suspended its dividend. Close observers noticed that Intel's free cash flow (FCF) turned negative in 2022, and that the company has nearly $30 billion in net debt due to the worsening outlook. Intel has been spending more money than it has earned since the beginning of 2023, and its Q2 2024 results essentially served as a D-Day for the company's existing policies and strategies. .
While this was a huge blow to investors, INTC shareholders should be thankful that very few large dividend funds/ETFs owned the stock this summer. Otherwise, sales would have been even worse.
I continue to believe that Intel has value. The company has tens of thousands of patents and a long-standing reputation for reliable chips. While the company's reputation with investors may be severely damaged, its reputation with long-time PC customers should be less so. This part of the business should continue to thrive as the company gets back on track and strives to improve its technological competitiveness for the AI era.
I suspect the new management is setting modest goals when it comes to graphics processing units. Taking on Nvidia and AMD head-on doesn't seem realistic, at least in the short term. Working on finding a viable niche like the Arc B580, which has garnered positive reviews within its value range, seems like a good medium-term goal.
I believe the company has a number of restructuring options to consider, including a rumored separation of the foundry and product businesses or a sale of part or all of the company. I think this is a positive sign that Intel is not rushing to complete a deal with Qualcomm (QCOM) or other interested parties just yet. No company wants to sell a business at its greatest weakness unless absolutely necessary.
One thing that concerns me is the co-CEO situation that is currently established between Michelle Johnston Holthaus and David Zinsner. With so many important decisions to make, having two people at the helm can lead to an impasse.
INTC stock hovered just below the $20 level in August and September, but rebounded above $26 following better-than-expected third-quarter results in early November. Investors were relieved that margins had recovered. But that shine has faded, and the stock has returned to the $20s following the departure of former CEO Pat Gelsinger.
I think the tax loss sell-off could cause INTC stock to fall further as early as this month. Additionally, some actively managed funds may wish to remove INTC from their annual reports for 2025.
When Intel stock crashed in August, I sold a put option for $17.50, and it recently expired, allowing me to accumulate premium. I recently re-entered that trade and wrote an April 2025 $18 put option on INTC. This trades at a premium of approximately $1.17 (or $117 per contract). If Intel stock falls below $18 and the put option is exercised against me, I have essentially entered a long position in INTC at $16.83. That's definitely a level that I feel comfortable participating in.
If INTC's stock price stabilizes and does not fall below $18 by April 17, 2025, you can retain option premiums of up to $117 per contract.
Many Wall Street analysts are taking a wait-and-see approach to Intel stock. Of the 29 analysts covering INTC, only 1 has a buy rating, 22 have a hold rating, and 6 have a sell rating. However, INTC's average price target is $24.43, implying over 20% upside from the current stock price.
See more INTC analyst ratings
I believe Intel can recover, but I'm not ready to buy common stock yet. As the market focuses on new management, there is a fair amount of risk that the stock could retest its low of $18.51 from early September 2024. The company will likely be in the red for the full year 2024, but analysts on average expect EPS to recover to $0.98 in 2025 (though expectations vary).
In that case, INTC stock's expected P/E ratio would be approximately 21 times, but it cannot be said to be a cheap price for a company with the uncertainties it faces. I would like to sell the April 2025 $18 put option and earn some proceeds to commit to buying INTC at 17x P/E in the future if the option is not called. . Officially, like many on Wall Street, I currently have a Hold rating on Intel stock.
