INTC about to miss earnings due to AMD Epyc server growth

26 juil. 2018

I previously called a technical breakdown in INTC following the competition of the ascending triangle. INTC subsequently fell, but has not yet hit its full down-side price target and has rallied a bit. This is a textbook Elliot Wave zigzag correction pattern and for fundamental reasons I see the final leg of the correction about to breakout, once again to the downside.

AMD just reported strong Q2 earnings after market close on 7/25/18, their best profits in seven years, on the strength of their new product portfolio. Most troubling for INTC is their growth of over 50% in their new Epyc server processors, which they attributed to growth in "Mega-data centers." This TAM is INTC's bread and butter and they have enjoyed essentially 100% control of that TAM which AMD is now starting to chip away at. I expect INTC's quatertly earnings report to show this when they report after-hours today, 7/26/18.

As far as trade entries go, I expect INTC to open sharply down today, more to do with the general tech dump following FB's disappointing earnings report. I do not think the loss of server market share will be priced in due to competition from AMD. So essentially, don't be afraid to chase this down a bit, but watch out for any recovery in FB, which will likely whip-saw up and down over the next few days, which could bring INTC back up from any drop at open. I will be playing this as a short-term earnings play and a medium term play as I think INTC is a good short with a soft backdrop in tech and the S&P500 emerging.

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As always, the responsibility for managing your position is your own. I am not a financial adviser nor is any content in this post intended to be financial advice. The information presented is my opinion, based on tools I have learned from others sharing their opinions and my experience in the markets. I share these ideas to generate discussion and have others critique my analysis because, as always, I am still learning. With that in mind, the outcome could be quite different than what I am predicting and this is for informational purposes only. It should not be considered financial or investment advice of any kind. Readers should consult with a financial or investment professional to determine what may be best for their individual needs.

28 juil. 2018

Note

Well, I was correct on the data center missing but wrong about INTC missing their earnings overall. From the price action of the stock, after hours when they held their earnings call, it seems like it was down about 4% on just the data center miss 5.55B in sales, vs. 5.63B expected, and then INTC dropped the bomb on their earnings call that their next gen 10 nm chips wouldn't be released until the bitter end of 2019.

From a technical perspective, the C wave is quite clearly underway, and it has a bit further to travel as well. I am comfortable shorting to $45.

I wanted to address a couple of errors, as I wrote this up rather hastily early in the morning after AMD reported their earnings, which gave me the catalyst I was looking for.

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CORRECTIONS:

I mentioned in the first paragraph the "ascending triangle breakdown" I meant to say "ascending wedge."

Most importantly: the conservative price target for the C wave, based on a 1:1 A to C ratio is $44.18 and I should have reduced that target zone. To be clear, I think its possible INTC hits as low as the green support line just above $38, but that is somewhat more unlikely or would take a broader market correction to get there.