A Progress Report On Intel

| About: Intel Corporation (INTC)

What follows is a progress report on Intel (NASDAQ:INTC). In my original article on Intel from Oct. 23, 2012, I wrote about the transformational changes taking place in the personal computer market and how they were affecting Intel and other participants in the PC industry. I concluded that of all the companies being adversely affected by the events taking place, Intel would fare best in the years ahead. It had already launched products directed at the tablet market and some of its plants were being retooled to produce new product lines. INTC has technology, facilities, and financial resources not available to many other participants in the PC space. In effect, I was "betting on new initiatives" by being bullish on the company at that time. Also, the stock's price action on the chart was bearish, so I choose to avoid the stock. The price of the stock was $21.25.

The stock is currently priced at $19.72. Some 45 analysts follow the stock and their consensus estimate of earnings per share is $2.11 and $1.96 for 2012 and 2013, respectively. (The 2013 estimate of $1.96 is down from $2.00 a month ago.) The high estimate for next year is $2.35, and the low is $1.60. So there are bulls and bears among the analysts. The indicated dividend rate is 92 cents. The current price/earnings ratio is 10 times the consensus estimate for 2013 and the dividend yield is 4.7%.

Fundamentally, What's New?

The major change that occurred since I wrote my original article was Paul Otellini's announcement that he will retire as CEO of the company in May 2013. A search is currently under way for his successor. It could be that an outsider will be selected for that position, which requires a visionary who has executive abilities. It is premature to speculate who his successor might be or what change in direction may result from the change at the top of the management team.

There has been some speculation in the news about the CEO being forced to resign for not doing a better job responding to the technological requirements of mobile devices. Intel gets about two-thirds of its revenue from its PC Client Group. What is at stake here is the company's profit margin as well as its market share. Only a small number of insiders know the real reason and significance of the CEO's planned resignation. If an outsider is chosen to be the new CEO, I would be inclined to speculate that Intel's problems are more deeply rooted than generally believed.

As noted above, new products were launched in Q3 and factories are being retooled in Q4 to produce them. There is a low power mobile chip under development that uses less power and is less expensive to make than its current mobile chip. It could be that these initiatives will be sufficient to compete effectively in markets for mobile devices.

Technically, What's New?

The other reason for this progress report is to provide an update on the stock's negative price action. So let's look at the updated chart I constructed from data in my workbook. Its salient features are explained in the notes below it.

Click to enlarge image.

1. The bold black line on top is price and the bold pink line below it is relative strength.

2. The dotted lines are moving averages, and there is a set of those for price and a similar set for relative strength; they are used to define trends and reversals.

3. The five sets of gray parallel lines that frame the stock's price action are 22-day trading ranges, and their progression shows how the trading range shifted during the 110 days charted.

4. The two wavy blue lines that straddle relative strength are Bolllinger Bands and they are used to detect overbought or oversold situations.

Items two through four are each independent of the others, and could be cited as a valid technical indicator for buying or selling the stock.

The trading ranges shifted downward during the past 66 days and their current indication is bearish. The relative strength line showed a negative reversal of strength about 99 days ago, and the stock has been a laggard vis-à-vis the market since then. The price line showed a negative reversal of strength about 66 days ago and it is still below its set of moving averages. The price of the stock will continue to decline as long as it remains below those averages. And, of course, the stock will continue to underperform the market until its relative strength shows a positive reversal relating to its averages. The 1X Bollinger Bands were not a significant factor during the time span shown on the chart.

In recent days the volume of trading in the stock was about 50% more than the 30-day average, so the selling in the shares was done with conviction. My opinion on the stock hasn't changed, so I continue to avoid it at this time due much more to the technical condition of the chart than the uncertainty engendered by the CEO's resignation.

When I am buying a stock I want the bottom of the price line to be behind me, not in front of me. We are approaching the end of the year and since the price is at its low point for the year, there could be some tax loss selling to come during the next several weeks. There is no current indication that the bottom on the price chart is imminent, but when I see that happening I expect to be a buyer of the stock. Because of the questions raised by the CEO situation as referred to above I would be inclined to hold the stock for as long as the technical reading on the chart remained bullish. I'll cross that bridge when I come to it.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: I never tell a reader how he or she should invest his or her money. I just write articles about stocks I am researching, render an opinion, and state what I am doing as an investor interested in the stocks. I would remind readers that it is up to them to make their own decisions about a stock's suitability according to their own personal investment criteria.