Intel
Intel (INTC) shares ripped lower this morning as the company’s earnings report has investors asking themselves whether the company can ever be relative in the semiconductor industry again.
The earnings report got off to a good start as the company beat their earnings per share (EPS) estimates by $0.04 on revenue growth of almost 9% better than last year’s. Things took a hard left turn when it came to guidance though.
Looking forward, Intel’s management warns of lower EPS and revenue for the next quarter. This is the second consecutive quarter that the company has guided the street lower, and investors appear to be throwing in the towel.
There are two schools of thought here…
One sees this as a possible “kitchen sink” quarter for the storied semiconductor that was once the Nvidia (NVDA) of the group. The company has lowered expectations for the last two quarters, as they are moving forward with their long-term plans to become “the largest AI chip manufacturing site in the world.”
Of course, that is part of a long-term plan that has already been stalled when the Biden Administration seemed to delay announcements regarding the allocation of funding from the CHIPS act, a key to Intel’s construction plans.
The Administration announced direct funding of $8.5 billion to Intel in March, along with other funding options to invest in the development of the company’s chip plants.
Ironically, the Biden Administration allocated more than $6.1 billion in funding from the CHIPS Act to Micron (MU) today, that stock is trading 2.5% higher.
The technicals are ugly for Intel as the stock is breaking into bear market trend territory today. The stock’s 20–month moving average – the technical measure of a bull or bear market – sits at $34.25, meaning that we could see some support from the long-term buyers.
Outside of that, the stock is best classified as a “turnaround candidate,” not a turnaround.
Boeing
Shares of Boeing (BA) are trading slightly higher today despite some bad news from rating agencies S&P and Fitch.
Both credit rating agencies dropped their ratings and credit outlooks for Boeing as they see the company struggling for cash flow and due to their production “challenges.” Moody’s, the third major rating agency, took similar action earlier.
S&P was first to act as the cut Boeing’s rating from “stable” to “negative,” a step closer to a junk rating for the company.
Fitch followed suit with a similar rating change while reaffirming their long-term issuer default rating of BBB-. The latter of those moves suggests that the rating agency sees this as a problem in the short term that the company will work its way out of over time.
The Boeing chart is seeing pressure applied to the price by overhead technical trends.
Boeings price - $167.56 – sits just 3% below its short-term 20-day moving average. That trendline quickly reversed Boeing’s post-earnings rally earlier this week signaling that traders are still trying to dump shares of the stock.
Analysts still maintain a strong buy recommendation on the stock, which could act as a catalyst for the stock’s price if news of the fresh credit rating downgrades results in reassessments from Wall Street.
That pressure and a break below the $160 level will likely see an acceleration of the stock price to $150 followed by another push lower to $120.
Nvidia
Nvidia (NVDA) shares made a technical leap today as the stock shot through two key indicators.
The stock rallied more than 6% in trading Friday on the tailwinds of Alphabet’s positive earnings headlines. We covered the Alphabet (GOOGL) and Microsoft (MSFT)’s earnings results today, along with which stock is a buy earlier today, check it out here.
Nvidia’s rally pushes the stock above its 20- and 50-day moving average on the same day. The last part of that is key. Historically, Nvidia shares follow through with an additional 5-7% rally in the following week when the stock crosses the 20- and 50-day trendline simultaneously.
The buying is also likely to trigger the beginning of a “buy the rumor” rally for Nvidia shares as the stock is less than a month away from its May 22 earnings report.
Last quarter, shares of Nvidia rallies 22% in the weeks ahead of its February 21 earnings date. Investors got nervous in the days immediately preceding the report and quickly took profits, shaving 9% from their value in only three days. The stock rested on its 20-day trendline that I mention above at 4:00 the day of the earnings report.
A similar situation may play out this time around as investors may see today as an opportunity and then back off those emotions just prior to the report.
Consider a target of $975 as a potential target for the short-term pre-earnings Nvidia rally.
About the Author
Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.