Intel (NASDAQ:INTC) and Yahoo (YHOO) Q1 results are on deck with the two technology giants scheduled to report after the bell on Tuesday. Will either be up to the task of beating Wall Street's expectations?
How Will the Chips Fall?
How well did INTC, a leader among semiconductor chip makers, fare in the fallout from PC sales in Q1? That appears to be a matter of banter among many analysts who dare to differ. On one hand, it's hard to see how INTC could have sidestepped the global decline in PC shipments that International Data Corp. (Pending:IDC) reported last week. Worldwide, IDC tracked an 11.5% drop to 60.6 million units from a year ago; in the U.S., it was a 5.8% fall to 13.6 million units.
Some analysts say they are bracing for a similar fallout at INTC, while others point out that INTC is now reporting its PC and mobile chip sales under the same division, giving it more legroom. Though PC chip sales may have faltered, the rise in sales of the Atom chip for smartphones and tablets could offset the decline.
Many analysts say they want to see how INTC's business units manage under the new reporting structure premiering with Q1 results. Also of primary interest, they say, are the data-center business, which the company projected would expand in low double-digits, and the cloud.
On the Thomson Reuters rolls, analysts are looking for a per-share profit of $0.48, up from $0.41 a share a year ago. Revenues are forecast at $13.86 billion, up better than 8% from the year-ago period.
Short-term options traders have priced in a potential 4% share price move in either direction around the earnings release, according to the Market Maker Move indicator on the thinkorswim®platform from TD Ameritrade.
Going into earnings, buyers are lining up at the 32.5-strike calls and the 31.5- and 31-strike puts. The implied volatility is at the 30th percentile. (Please remember past performance is no guarantee of future results.)
Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over a set period of time. Put options represent the right, but not the obligation, to sell the underlying security at a predetermined price over a set period of time.
Figure 1: INTC'S TOUGH YEAR. Shares have traded in a tight range between the low $20s and low $30s since April 2015. Chart source: thinkorswim® by TD Ameritrade. Data source: Standard & Poor's. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.
Will YHOO Sale Preempt Earnings?
What's more compelling about YHOO today? The search engine's potential sale or Q1 earnings results? Or maybe the bigger question is: Will YHOO even talk about bids, which were due from potential suitors Monday?
Maybe, maybe not. Verizon (NYSE:VZ) is considered the frontrunner, according to the Wall Street Journal, partly because it was still in this buyer's game after a boatload of others dropped out. But also, according to WSJ, because it has the cash, the means, and the "logical blueprint" to fold YHOO into its developing digital media business. Remember VZ bought AOL last year. WSJ also notes that other bidders might come from private-equity firms, or the company could be broken up. A late-comer interested in the party was the British newspaper the Daily Mail, which reportedly is looking to partner up with a private-equity group.
So much for the future, let's talk about the past. YHOO's efforts to redefine itself as a mobile media giant has been a struggle, according to industry analysts. A number of costly acquisitions, including high-priced talent, hasn't powered the top or bottom lines as quickly as YHOO had hoped, company executives have said.
For the quarter, the Thomson Reuters analyst group is pegging a profit of $0.07 a share, plummeting 53% from the year-ago period. Revenues are projected to slump 12% to $1.08 billion compared with last year.
Short-term options traders have priced in a potential 4.5% share price move in either direction around the earnings release, according to the Market Maker Move indicator.
Going into earnings, there's activity at the 37-strike calls and the 35-strike puts. The implied volatility is smack dab in the middle at the 50th percentile.
Figure 2: YHOO'S SALE RIDE. Investor optimism over a possible sale of the company put a fire under shares, which have vaulted better than 36% since bottoming out in early February. Chart source: thinkorswim® by TD Ameritrade. Data source: Standard & Poor's. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.
TD Ameritrade® commentary for educational purposes only. Member SIPC. Options involve risks and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options.
Disclosure: I/we 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. I have no business relationship with any company whose stock is mentioned in this article.