Intel Stock is poised for a breakout, and short covering could help matters. The stock now has a dividend yield of over 3%. Time to buy?
Following Friday's further decline, shares of Santa Clara, California-based Intel Corporation (NASDAQ:INTC) are now down by nearly 10% from their 52 week high. What this has also done, is boosted the dividend yield at the current price and taken it past the 3% mark. Meanwhile, Intel stock looks set to break out above its next resistance level at its 50 day Simple Moving Average. If this does play out, the stock could continue to rise. In the scenario that the stock continues to rally, short covering could also potentially aid the up-move.
Intel Stock Dividend Yield Goes Past 3%.
Towards the end of July 2017, Intel reported its earnings for the second quarter of the year. And as we discussed in a detailed post, Intel delivered good numbers. While many on the street expected to see the impact of AMD's onslaught, with its Ryzen line up of CPUs, no such major dents were visible. In fact, the company reported strong numbers on most fronts, with stronger than expected top line growth and a noteworthy 2.7% improvement in gross margins to touch 61.6%. Revenue grew by 9% YoY, and 14% if you adjust for the exclusion of the Intel Security Group. Earnings grew by a healthy 22% YoY. What was most impressive, though, was that Intel actually hiked its full year guidance. While Intel shares initially reacted well, rising over the course of the next few days, they haven't fared very well since.
August has been a weak month for Intel stock. Since hitting a closing price of about $36.6 on August 2nd, Intel shares have fallen consistently, losing nearly 5.5% in less than a month. This, in spite of the strong earnings it posted last month. That said, the silver lining is that this has helped the stock's dividend yield. Intel stock now has a dividend yield in excess of 3%. To be precise, at Friday's closing price of $34.67 per share, Intel shares carry a dividend yield of 3.15%. That's not bad at all. Intel is not only doing well at the moment, it's also entering a sought after industry with its charge into the self-driving cars space.
Earlier this month, Intel announced that it plans to build a fleet of cars to test its self driving technology. Quoting from our earlier post:
"On Wednesday, Intel announced that it plans to build a fleet of 100 cars with an aim to test its self-driving technology. This is Intel's attempt to get ahead of competition from rivals like Qualcomm and Nvidia. The cars Intel plans to build will be highly automated level 4 vehicles, putting them just short of fully autonomous cars. One notch, to be specific. However, these cars will be way ahead of autopilot features that are already on mass production vehicles."
Intel plans to leverage its purchase of Mobileye by conducting tests in the U.S.A, Europe and Israel. Intel now owns close to 85% of Israel-based Mobileye. Combined, the two aim to build technology that could be deployed in cars scheduled to hit the road as early as 2018. While Intel's current financial performance, aided by the recently hiked guidance make a case for investing in the stock for dividends, the possibility that Intel could tap into high growth markets like self driving cars, is an additional attraction.
Intel Stock Technical Analysis And Short Interest.
Intel shares look headed higher given the current technical set up. Over the last few days, Intel stock has faced strong resistance from its 50 day Simple Moving Average, which is currently at 34.75. However, shares of the Chipzilla are poised to break out above this resistance level. Today's pre-market price of $34.87 indicates that the stock could break out today. If this plays out, the next resistance level is at its 100 day SMA at $35.23, followed by its 200 day SMA $35.27. Both of these are about 2% higher than Friday's close. Intel shares don't typically see big swings in either direction. However, the recent run up in short interest also opens up the possibility of a short covering fuelled rally.
According to the latest available data as of mid August, which became available on the 24th, short interest in Intel stock has risen sharply, spiking by close to 10%. During the fortnight in question, short interest rose by over 9% to touch 100.8 million shares. Intel is the third most shorted stock on the NASDAQ, coming in just after arch rival AMD in 2nd place. As a percentage of float, short interest isn't too high, at just over 2%. However, with days to cover at 4, you can't rule out the possibility of a rally fuelled by short covering, if Intel stock moves higher over the coming days. Taking into consideration all of the above, now may be a good time to invest in Intel stock.
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