NVIDIA Split Announcement Raises Red Flag

NVIDIA Corp. (NVDA) reports Q1 2021 earnings in Wednesday’s post-market, with analysts expecting a profit of $3.22 per-share on $5.2 billion in revenue. If met, earnings-per-share (EPS) will mark a 78% profit increase compared to the same quarter last year, when the pandemic triggered worldwide shutdowns. The stock sold off more than 8% in February, despite beating Q1 2020 top and bottom line estimates and issuing higher revenue guidance.

Why Announce Split Just Before Earnings?

The systems chip manufacturer announced a four-for-one stock split on Friday morning, effective on July 20th. The timing raises a red flag, given the close proximity of this week’s report, triggering speculation the company is attempting to manage potential disappointment ahead of a less-than-spectacular quarter. Even so, the long string of better-than-expected releases is unlikely to defer investor interest ahead of the news.

KeyBanc analyst John Vinh upgraded the stock from ‘Sector Weight’ to ‘Overweight’ on May 20, one day before the split announcement, setting a $700 price target. He noted NVIDIA “is best positioned to monetize one of the fastest and highest value-added workloads in the data center in artificial intelligence/machine learning.” Vinh downgraded rival Intel Corp (INTC) at the same time, highlighting the chip behemoth’s loss of market share to the juggernaut in the last year.

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating based upon 28 ‘Buy’, 5 ‘Overweight’, 4 ‘Hold’, 1 ‘Underweight’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $380 to a Street-high $800 while the stock closed Friday’s session about $75 below the median $675 target. This low placement suggests Main Street investors are more worried than professional analysts about high valuation and the continued worldwide chip shortage.

NVIDIA completed a breakout above 2018 resistance at 293 in May 2020 and entered a powerful uptrend that carved a straight-line channel into the September peak at 589. February and April 2021 breakout attempts failed while the stock is now engaged in a third attempt. This mixed action has carved an expanding wedge pattern that should limit momentum until buying pressure clears 680, which is more than 13% above the current price.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Bears in Charge Ahead of AMD Report

Advanced Micro Devices Inc. (AMD) reports Q1 2021 earnings after Tuesday’s closing bell, with analysts expecting a profit of $0.44 per-share on $3.20 billion in revenue. If met, earnings-per-share (EPS) will mark a 240% profit increase compared to the same quarter in 2020. The stock sold off 6.5% in January after beating Q4 2020 estimates and has continued to underperform into the second quarter.

Posting Year-To-Date Loss

AMD and NVIDIA Corp. (NVDA) posted impressive 2020 returns in reaction to multiple missteps at Dow component Intel Corp. (INTC). INTC sentiment has improved substantially in 2021 but that didn’t stop NVDA from posting an all-time high just two weeks ago. Sadly, AMD has failed to match the performance of either rival, slumping to an 8% year-to-date loss while entering the third month of dead price action at the 200-day moving average.

Raymond James analyst Chris Caso outlined the bull case last week, noting “the stock’s pullback has been driven by improved sentiment that Intel will solve their manufacturing challenges, which will reverse AMD’s successes. We’re taking the other side of that view. Now that Intel has committed to internal manufacturing, we think it’s unlikely that Intel ever regains a transistor advantage vs. AMD, and the current roadmaps ensure an advantage for AMD/TSMC through at least 2024”.

Wall Street and Technical Outlook

Wall Street consensus matches this analyst’s view, with an ‘Overweight’ rating based upon 17 ‘Buy’, 4 ‘Overweight’, and 12 ‘Hold’ recommendations. However, three analysts now recommend that shareholders close positions and move to the sidelines. Price targets range from a low of $70 to a Street-high $120 while the stock closed Friday’s session more than $20 below the median $105 target. This low placement reflects skepticism about the chipmaker’s ability to compete with larger rivals.

AMD completed a breakout above the 2000 high in the 40s in July 2020 and entered a trend advance that lost steam in the 90s in September. It posted an all-time high at 99.23 in January 2021 and eased into an intermediate correction that reached the 200-day moving average in February. Price action has gone comatose while a monthly Stochastic sell cycle still hasn’t hit the oversold level. In turn, this tells us that bears remain in firm control of the ticker tape.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Why Shares Of Intel Are Down By 6% Today?

Intel Video 23.04.21.

Intel Stock Declines After The Release Of Q1 2021 Report

Shares of Intel found themselves under strong pressure after the company released its first-quarter results. Intel reported revenue of $19.7 billion and GAAP earnings of $0.82 per share, beating analyst estimates on revenue and missing them on earnings.

The company increased its full-year 2021 guidance. This year, Intel expects to record GAAP revenue of $77 billion and GAAP earnings of $4.00 per share. On a non-GAAP basis, Intel expects to report earnings of $4.60 per share, mostly in line with the analyst consensus of $4.58 per share. Analysts expect that Intel will report earnings of $4.67 per share in 2022 so the stock is trading at less than 13 forward P/E after today’s sell-off.

Interestingly, improved guidance failed to provide support to Intel shares as traders focused on the company’s potential problems with the plan to expand its foundry capability. Some analysts, including Bank of America, believe that this move will be expensive and may put pressure on earnings.

What’s Next For Intel?

Intel stock had a rough 2020, and it failed to return to pre-pandemic levels despite strong demand in the semiconductor space due to the company’s internal problems.

This time, the market focused on the cost side of the foundry expansion story which served as a bearish catalyst for Intel shares. The stock is trading at attractive valuation levels but it remains to be seen whether traders will rush to buy the dip.

Rising capex levels may put pressure on the company’s earnings performance, and it would be hard to justify higher P/E multiples if earnings growth is limited. In addition, the company’s recent history of problems may also put some pressure on valuation. Most likely, Intel shares will need additional catalysts to get back to the previous upside trend.

For a look at all of today’s economic events, check out our economic calendar.

Mixed Outlook Ahead of Intel Report

Dow component Intel Corp. (INTC) reports Q1 2021 earnings after Thursday’s closing bell, with analysts looking for a profit of $1.14 per-share on $17.97 billion in revenue. If met, earnings-per-share (EPS) will mark a 21% profit decline compared to the same quarter last year.  The stock gave back a 6.5% advance after beating Q4 2020 top and bottom line estimates in January but performed well into early April, posting a 15 month high.

Investing in Local Fabrication

Investors have forgiven the chip giant after 2020 missteps forced loyal customers to cut deals with competitors Advanced Micro Devices Inc. (AMD) and NVIDIA Inc. (NVDA). NVIDIA, in particular, is rolling out highly-competitive products at a lightning pace, ready to build even greater market share in coming years. Intel has shifted gears to meet the challenge, investing billions to become a major foundry supplier. That effort could pay off, given worldwide chip shortages this year.

Needham analyst Pat Gelsinger posted upbeat comments about the initiative in March, noting “With most of the world’s leading edge foundry capacity now concentrated in Asia, Intel also launched Intel Foundry Services (IFS) to address the industry’s capacity constraints and need for more geographically balanced manufacturing capacity, with manufacturing locations in the U.S. and Europe. Intel also announced it will be spending $20 billion to build two new fabs in Arizona, which will support its current products as well as its foundry customers.”

Wall Street and Technical Outlook

Wall Street sentiment remains mixed despite share gains, with a consensus ‘Hold’ rating based upon 15 ‘Buy’, 1 ‘Overweight’, 15 ‘Hold’, and 2 ‘Underweight’ recommendations. More importantly, 8 analysts still recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $40 to a Street-high $90 while the stock is set to open Thursday’s session about $6 below the median $70 target. This low placement could support rapid upside in reaction to a strong report.

Intel topped out in the upper 50s in 2018 and eased into a complex pattern, ahead of a 2020 rally and failed breakout during the pandemic decline. Steep declines have posted four lows in the mid-40s in the last three years, draining bullish sentiment and shareholder patience. The stock rallied within a point of 2020’s multiyear high this month but accumulation-distribution has failed to recover, setting off a bearish divergence that raises odds for another steep downturn.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Intel Rallies to 52-Week High

Dow component Intel Corp. (INTC) is trading at a 52-week high in Wednesday’s pre-market session after issuing upside Q1 earnings-per-share (EPS) guidance and announcing an estimated $20 billion investment in two new fabrication facilities in Chandler, AZ.   Investors chose to ignore downside guidance for fiscal year 2021, with newly-projected non-GAAP revenue of $72.0 billion lower than prior estimates of $73.03 billion.

Adding Fabrication Capacity

The company cited strong demand for notebook computers in the quarterly call but tempered full year guidance due to industry-wide component shortages. It also announced the establishment of Intel Foundry Services (IFS), which intends to become a major supplier of U.S. and Europe-based foundry capacity, as well as a partnership with International Business Machines Corp. (IBM) to create next-generation logic and packaging technologies.

Needham analyst N. Quinn Bolton raised his target to $74 on Wednesday, noting that Intel “reiterated its plan to build the majority of its products in-house while also increasing its use of third-party foundries. With most of the world’s leading edge foundry capacity now concentrated in Asia, Intel also launched Intel Foundry Services (IFS) to address the industry’s capacity constraints and need for more geographically balanced manufacturing capacity”.

Wall Street consensus remains skeptical despite the news, with a ‘Hold’ rating based upon 15 ‘Buy’, 1 ‘Overweight’, 16 ‘Hold’, and 2 ‘Underweight’ recommendations. More importantly, 8 analysts recommend that shareholders close positions and move to the sidelines. Price targets range from a low of $40 to a Street-high $90 while the stock is set to open Wednesday’s session on top of the median $65 target. This mid-range placement suggests Intel is fairly-valued at this time.

Wall Street and Technical Outlook

The stock has struggled since topping out above 57 in June 2018, oscillating in an expanding wedge that carved slightly higher highs in 2019 and the first quarter of 2020. Support at a shallow trendline in the 40s has been tested four times during this period, generating high volatility and poor returns. The current uptick has now stretched within four points of resistance at January 2020’s all-time high at 69.29, telling prospective shareholders to keep their powder dry, due to adverse reward-to-risk.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

AMD Hovering Under 100 Ahead of Report

Advanced Micro Devices Inc. (AMD) reports Q4 2020 earnings after Tuesday’s closing bell, with analysts looking for a profit of $0.30 per-share on $3.02 billion in revenue. If met, earnings-per-share (EPS) will mark a slight profit decrease compared to the same quarter in 2020. The stock fell 4.1% in October despite beating Q3 top and bottom line estimates, with shareholders jumping ship after the company announced it would acquire Xilinx Inc. (XLNX) for $35 billion.

Is AMD Paying Too Much for Xilinx?

The stock has been running in place since early September, trading around the summer rally peak at 94.28. Outsized share gains and concerns the company is paying too much for Xilinx have weighed on buying interest but the overall pattern in the last five months looks bullish, raising odds for a sustained breakout into triple digits.  Even so, Intel Corp (INTC) missteps in the last year have yet to translate into higher AMD profits.

Cowen analyst Matthew Ramsay raised his target to $110 earlier this month noting, “We expect a strong Q4 and raise our 2021 revenue estimates as AMD’s share gains in PC, server, and console markets continue to track above consensus. 2021 EPS ticks down entirely due to higher 15% tax rate, and we introduce well-above Street 2022 numbers. We upgraded Intel today on the potential of the CEO change, but AMD’s momentum is here and now (and increasing).”

Wall Street and Technical Outlook

Wall Street consensus has deteriorated to an ‘Overweight’ rating after historic share gains, based upon 18 ‘Buy’ and 12 ‘Hold’ recommendations. Two analysts now recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $13 to a Street-high $120 while the stock opened Monday’s U.S. session about $6 below the median $100 target. A breakout after an upside surprise is possible with this placement.

The stock topped out in the mid-90s in September and has failed three breakout attempts into January 2021. Price action has held high in the 5-month trading range but selling pressure has increased, dropping accumulation-distribution readings to the lowest low since July when AMD was trading more than 40 points lower. Higher-than-expected quarterly profits could overcome this deficit while an earnings miss is likely to drop price into fourth quarter support in the 70s.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

S&P 500, Dow Stumble, Dragged Down by Blue-Chip Technology Stalwarts IBM, Intel

The major Wall Street stock indexes took a breather on Friday with two even settling lower after posting record highs earlier in the week. Traders blamed the weakness on losses in blue-chip technology stalwarts Intel and IBM following their quarterly results, as hopes dimmed for a full economic reopening in the coming months.

Cash Market Performances

In the cash market on Friday, the benchmark S&P 500 Index settled at 3841.47, down 11.60 or -0.34%. The blue chip Dow Jones Industrial Average finished at 30996.98, down 179.03 or -0.65% and the technology-based NASDAQ Composite closed at 13543.06, up 12.14 or +0.11%.

Friday’s Recap

U.S. stocks were under pressure before the cash market opening because of the IBM miss and weak PMI data out of Europe. Investors took profits in Asia and Europe ahead of the weekend, leading to a drop in investor sentiment.

The S&P 500 and the NASDAQ pared some losses after the opening bell as data showed U.S. manufacturing activity surprisingly surged to its highest level in more than 13-1/2 years in early January, in contrast to a disappointing result in the purchasing manager data in Europe earlier.

In the U.S., Flash Manufacturing PMI rose to 59.1, up from 57.1 and better than the 56.6 forecast. Flash Services PMI jumped to 57.5, up from a revised lower 54.8 and better than the 53.3 estimate.

Existing Home Sales surged to 6.76 million units, beating the 6.55 million unit forecast and the previously reported 6.71 million units.

White House Coronavirus Update

In a White House event on Thursday, President Biden painted a bleak picture of the nation’s coronavirus outbreak in his first few days in office, warning that it will take months to turn around the pandemic’s trajectory and that fatalities are expected to dramatically rise over the next few weeks.

Biden said the U.S. death toll from the pandemic will probably top 500,000 next month.

Yellen Nomination Sails Through Senate Panel; Final Vote Set for Monday

The U.S. Senate Finance Committee on Friday unanimously approved Janet Yellen’s nomination as the first woman Treasury Secretary, indicating that she will win full Senate approval, but Republicans called for her to work with them in developing economic policies.

Stocks Making Headlines

IBM Corp slumped 9.83% and was the top drag on the Dow Jones Industrial Average after it missed estimates for quarterly revenue, hurt by a rare sales decline in its software unit.

Intel Corp shed 8.93% as new Chief Executive Officer Pat Gelsinger’s post-earnings comments suggested the lack of a strong embrace of outsourcing.

However, losses in the tech sector were offset by gains from Microsoft Corp, Apple Inc and Facebook Inc, keeping the declines on the main U.S. stock indexes in check.

For a look at all of today’s economic events, check out our economic calendar.

Stocks Move Lower After Disappointing Reports From IBM And Intel

S&P 500 Futures Decline Amid Sell-Off In Tech Stocks

Shares of IBM and Intel are losing ground in premarket trading after the release of their quarterly earnings reports.

IBM missed analyst estimates on revenue amid weak performance of its Cloud & Congnitive Software segment. IBM stock has underperfomed its tech peers for years, and another disappointing report put significant pressure on the company’s shares which are losing more than 8% in premarket trading.

Meanwhile, Intel stated that it would continue to internally produce the majority of its products. As Intel has recently suffered from production issues, the stock found itself under pressure after this announcement and is currently losing more than 4% in premarket trading.

Big tech stocks like Facebook, Apple, Amazon are also under pressure ahead of the market open, and S&P 500 futures are down by more than 0.5%.

Oil Is Under Strong Pressure Amid Rising Coronavirus Cases In China

WTI oil is down by about 3% today as traders focus on the continued spread of the virus in China. Strong demand from China is the main driver of the global demand for oil so traders pay close attention to recent developments as the virus starts spreading across the country, forcing Chinese authorities to implement anti-virus measures in affected areas.

The recent API Crude Oil Stock Change report, which indicated that crude inventories increased by 2.6 million barrels, also hurt sentiment, although traders will still wait for confirmation from EIA Weekly Petroleum Status Report which will be published today. Not surprisingly, oil-related stocks are already under significant pressure in premarket trading.

PMI Reports Show That The Second Wave Of The Virus Continues To Put Pressure On The Services Segment

Today, the U.S will release flash PMI reports for January. Manufacturing PMI is projected to decline from 57.1 in December to 56.5 in January while Services PMI is expected to decrease from 54.8 to 53.6.

Many countries have already released their PMI reports which showed that the services segment continued to suffer from the second wave of the virus. Euro Area Services PMI declined from 46.4 to 45 while UK Services PMI decreased from 49.4 to 38.8.

If U.S. Services PMI report is worse than expected, the market will find itself under additional pressure.

For a look at all of today’s economic events, check out our economic calendar.

US Stock Index Futures Testing Record Highs as Earnings Season Continues

U.S. stock futures are edging higher in overnight trading on Wednesday following a flat opening after the major cash market averages hit record highs on inauguration day.

At 07:21 GMT, benchmark S&P 500 Index futures are up 0.27%. The blue chip Dow Jones Industrial Average is trading higher by 0.16% and the tech-based NASDAQ Composite is up by 0.49%.

The early price action indicates investors have moved on from the bearish earnings report released by United Airlines after the close on Wednesday.

Major airline United dipped more than 2% in extended trading on Wednesday after missing on the top and bottom lines of its quarterly earnings. The airline warned sales would continue to suffer in the early part of 2021 as the coronavirus pandemic drags on.

Earnings season continues on Thursday with Baker Hughes, Union Pacific and Citrix reporting before the bell. Intel, IBM and CSX report after the closing bell on Thursday.

In economic news, the Labor Department will release last week’s jobless claims data at 13:30 GMT on Thursday. Economists polled by Dow Jones expect 925,000 Americans filed for unemployment last week, down from the previous week’s 965,000.

Wednesday Recap

U.S. equities rose to record highs on Wednesday as the latest batch of strong corporate earnings rolled in, as Joe Biden was sworn in as commander in chief.

The S&P 500 Index climbed 1.4%, notching an all-time high. The Dow Jones Industrial Average rose more than 250 points to close at a record and the NASDAQ Composite surged nearly 2%, closing at a record. The technology heavy index was helped by a 16% jump in Netflix’s stock on the back of the streaming giant’s strong earnings and subscriber results.

The rest of the FAANG group, due to report results in the coming weeks, jumped with Facebook Inc, Amazon.com Inc, Apple and Google-parent Alphabet Inc rising between 2% and 5%.

Eight of the 11 S&P sectors advanced in afternoon trading, with technology, communication services and consumer discretionary among the biggest gainers.

The broader banks index, however, shed about 1.6%, declining for the third day.

Earnings Results

Morgan Stanley edged higher after its quarterly profit blew past estimates driven by strength in its trading business.

Procter & Gamble Co raised its full-year sales forecast for a second time as it benefited from sustained coronavirus-driven demand for cleaning products. Its shares, however, slipped about 1.4% after it warned that the pace of sales might slow as vaccines roll out.

UnitedHealth Group Inc slid 0.3% after the health insurer’s quarterly profit slumped nearly 38%, weighed down by costs related to its programs to make COVID-19 testing and treatment more accessible for its customers.

For a look at all of today’s economic events, check out our economic calendar.

Intel Hits 6-Month High After CEO Announcement

Dow component Intel Corp. (INTC) rallied to the highest high since July on Wednesday after the company took a big step toward recovery, appointing former VMWare CEO Pat Gelsinger to the CEO slot. Current CEO Bob Swan will retire on Feb. 15, leaving behind a battered tech giant forced to treat a series of self-inflicted wounds. The company guided Q4 results above prior guidance at the same time, with both catalysts setting off a 7% rally.

Multiple Upgrades After the News

The news generated a flurry of upgrades, with Cowen, Morgan Stanley, Atlantic Equities, and BMO Capital Markets issuing upgrades and new price targets. Even so, the company faces a long road to higher prices after multiple missteps triggered an exodus to NVIDIA Inc. (NVDA), Advanced Micro Devices Inc. (AMD) and other well-positioned rivals. And, while all three manufacturers should prosper in coming years, Intel has probably lost permanent market share.

Cowen analyst Matthew Ramsay upgraded the stock to ‘Outperform’ with a $75 price target after the news, noting, “We have long believed Intel has the engineering talent, product breadth, access to capital, political backing and scale to eventually reinvigorate its competitiveness — both in products and manufacturing. Bringing former CTO Pat Gelsinger back from VMWare as CEO has the potential to galvanize Intel behind a more credible forward strategy and roadmap.”

Wall Street and Technical Outlook

Wall Street consensus failed to improve overnight, continuing a cautious ‘Hold’ rating based upon 10 ‘Buy’ and 13 ‘Hold’ recommendations. More importantly, five analysts still recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $40 to a Street-high $80 while the stock opened Thursday’s U.S. session just $1 above the median $57 target. This placement suggests that Intel is fully-valued at this time.

The stock sold off to the March low in October and bounced to resistance in the low 50s. A secondary decline found support above the prior low in December while this week’s rally has completed a double bottom reversal and filled the July gap. Buying volume posted about three times the 60-day moving average, which wasn’t enough to set off strong buy signals. Taken together with other headwinds, it makes sense to wait for Wednesday’s gap to get filled before getting on board.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Strong Performances in Utilities, Real Estate Sectors Lift Benchmark S&P 500 Index

The major U.S. stock indexes finished mixed on Wednesday as investors seemed to be distracted by the impeachment hearings in Congress ahead of Thursday’s speech by Federal Reserve Chairman Jerome Powell and the start of earnings season on Friday. Investors are also anticipating a speech by President-elect Joe Biden on Thursday night where he is expected to announce his COVID-19 economic relief plan.

In the cash market on Wednesday, the benchmark S&P 500 Index settled at 3809.84, up 8.65 or +0.26%, the blue chip Dow Jones Industrial Average finished at 31060.47, up 8.22 or +0.03% and the tech-based NASDAQ Composite closed at 13128.95, up 56.52 or +0.51%.

Sectors in Focus

Seven of the 11 major S&P sectors gained ground. The S&P growth index, climbed 0.5% to outperform the value index, which fell 0.05%.

Utilities rose 1.9% and real estate advanced 1.4%, leading the percentage gains, while the biggest losers were the more economically sensitive sectors such as materials and industrials, which fell about 1%.

Stocks on the Move

Intel Corp was the biggest percentage gainer in the S&P, advancing 7% after the chipmaker said it would replace its Chief Executive Officer Bob Swan with VMware Inc CEO Pat Gelsinger next month. Shares of VMware fell 6.8% after the Intel news.

Regeneron Pharmaceuticals Inc’s shares climbed 1.2% after the U.S. government said it would buy 1.25 million additional doses of its COVID-19 antibody cocktail for about $2.63 billion.

Earnings Move to the Forefront

Earnings reports from big U.S. banks including JPMorgan and Citigroup were also on investors’ minds as they will mark the unofficial start to the fourth-quarter earnings season on Friday.

Earnings for S&P 500 companies are expected to have dropped 9.8% year-over-year in the final quarter of 2020, according to IBES data from Refinitiv, but they are expected to rebound in 2021, with a gain of 16.4% projected for the first quarter.

US Economic Reports

U.S. consumer prices increased in December, with households paying more for gasoline, though underlying inflation remained tame as the economy battled a raging COVID-19 pandemic, which has weighed on the labor market and the services industry.

U.S. economic activity increased modestly in recent weeks and a growing number of the Federal Reserve’s districts saw a drop in employment as a surge in coronavirus cases led to more shutdowns of businesses, the U.S. central bank’s Beige Book showed on Wednesday.

“Although the prospect of COVID-19 vaccines has bolstered business optimism for 2021 growth, this has been tempered by concern over the recent virus resurgence and the implications for near-term business conditions,” the Fed noted in the report.

The report was the first since last May to report outright declines in activity in some of the Fed’s districts.

For a look at all of today’s economic events, check out our economic calendar.

Stock Pick Update: Dec. 30 – Jan. 5, 2021

In the last five trading days (December 23 – December 29) the broad stock market has extended its record-breaking run-up. The S&P 500 index reached new record high of 3,756.12 on Tuesday following the recent stimulus news.

The S&P 500 has gained 0.91% between December 23 open and December 29 close. In the same period of time our five long and five short stock picks have lost 0.07%. Stock picks were relatively weaker than the broad stock market last week. Our long stock picks have lost 0.30% and short stock picks have resulted in a gain of 0.16%.

There are risks that couldn’t be avoided in trading. Hence the need for proper money management and a relatively diversified stock portfolio. This is especially important if trading on a time basis – without using stop-loss/ profit target levels. We are just buying or selling stocks at open on Wednesday and selling or buying them back at close on the next Tuesday.

If stocks were in a prolonged downtrend, being able to profit anyway, would be extremely valuable. Of course, it’s not the point of our Stock Pick Updates to forecast where the general stock market is likely to move, but rather to provide you with stocks that are likely to generate profits regardless of what the S&P does.

Our last week’s portfolio result:

Long Picks (December 23 open – December 29 close % change): CRM (-4.32%), NVDA (-2.36%), PSX (0.00%), FANG (+4.72%), SPGI (+0.47%)
Short Picks (December 23 open – December 29 close % change): SO (+0.10%), AES (+0.73%), WY (-1.27%), ARE (-0.88%), CL (+0.52%)

Average long result: -0.30%, average short result: +0.16%
Total profit (average): -0.07%

Stock Pick Update performance chart since Nov 18, 2020:

Let’s check which stocks could magnify S&P’s gains in case it rallies, and which stocks would be likely to decline the most if S&P plunges. Here are our stock picks for the Wednesday, December 30 – Tuesday, January 5 period.

We will assume the following: the stocks will be bought or sold short on the opening of today’s trading session (December 30) and sold or bought back on the closing of the next Tuesday’s trading session (January 5).

We will provide stock trading ideas based on our in-depth technical and fundamental analysis, but since the main point of this publication is to provide the top 5 long and top 5 short candidates (our opinion, not an investment advice) for this week, we will focus solely on the technicals. The latter are simply more useful in case of short-term trades.

First, we will take a look at the recent performance by sector. It may show us which sector is likely to perform best in the near future and which sector is likely to lag. Then, we will select our buy and sell stock picks.

There are eleven stock market sectors: Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Technology, Communications Services, Utilities and Real Estate. They are further divided into industries, but we will just stick with these main sectors of the stock market.

We will analyze them and their relative performance by looking at the Select Sector SPDR ETF’s .

Based on the above, we decided to choose our stock picks for the next week. We will choose our 5 long and 5 short candidates using trend-following approach:

  • buys: 2 x Technology, 2 x Health Care, 1 x Communication Services
  • sells: 2 x Utilities, 2 x Energy, 1 x Real Estate

Buy Candidates

NVDA NVIDIA Corp. – Technology

  • Stock trades along medium-term upward trend line
  • Possible breakout above short-term consolidation
  • The support level is at $490-500 and resistance level is at $550, among others

INTC Intel Corp. – Technology

  • Stock retraced most of its recent declines
  • Possible breakout above medium-term downward trend line
  • The support level is at $47 and the nearest important resistance level is at $52

ABBV AbbVie Inc. – Health Care

  • Stock broke above short-term downward trend line – uptrend continuation play
  • The support level is at $100-102 and resistance level is at $106-108

Summing up , the above trend-following long stock picks are just a part of our whole Stock Pick Update . The Technology and Health Care sectors were relatively the strongest in the last 30 days. So that part of our ten long and short stock picks is meant to outperform in the coming days if the broad stock market acts similarly as it did before.

We hope you enjoyed reading the above free analysis, and we encourage you to read today’s Stock Pick Update – this analysis’ full version. There, we include the stock market sector analysis for the past month and remaining long and short stock picks for the next week. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today .

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Paul Rejczak
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care

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Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Three Top Plays for The January Effect

We’re rapidly approaching the start of 2021 and the January Effect, when market players scoop up the prior year’s biggest losers in hopes of high percentage returns. The new crop of hopefuls is smaller than in prior years because many stocks are trading close to 52-week or all-time highs, restricting the available equity pool. It’s also important to do your homework, if interested in this classic trade, because many losers are destined for even lower prices.

U.S. laws require that investors pay capital gains tax when they sell shares for a profit, except in retirement accounts, which gets taxed at the time of distribution. This requirement induces many folks to keep their strongest stocks through December to lower annual tax bills. In turn, these winners often get sold aggressively in January, freeing up capital that can be risked on bottom fishing, value hunting, and all the other reasons that market players buy cheap stocks.

Let’s look at three prime candidates for the January Effect.

Intel

Intel Corp. (INTC) has done just about everything wrong in 2020. Delayed product rollouts and weak management have allowed smaller rivals to pick up critical market share, making the tech icon one of the worst mega-cap performers, with a 16% year-to-date loss compared to the Nasdaq-100’s 40%+ return. Even so, sidelined investors are hoping for a management shake-up and could pick up shares aggressively in 2021.

Tyson Foods

Tyson Foods Inc. (TSN) and many meatpackers ignored the growing pandemic in the first quarter and failed to take precautions to keep their workers safe. The ensuring scandal cost lives, with widespread infections at plants all across the Midwest and South. Supply chains then broke down, raising prices while lowering revenues. The industry is now in recovery mode but the stock is still down more than 24% for the year, making it an ideal January Effect candidate.

Boston Scientific

Boston Scientific Corp. (BSX) has posted weak or negative growth in the last three quarters. In addition, recalls and lawsuits have plagued the company for many years, raising questions about research methodology and quality control. The stock posted an all-time high in December 2019 and fell to a three-year low in March. The subsequent recovery failed in September, yielding a steady downtick that’s now brought the annual loss to a painful 26%.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Advanced Micro Devices Headed For Triple Digits

Advanced Micro Devices Inc. (AMD) is having an outstanding 2020, posting a 105% year-to-date return. Better yet, the stock has finally worked off extremely overbought technical readings incurred during the third quarter’s vertical advance and could break out, lifting into triple digits for the first time in its multi-decade public history. Right now, the sky’s the limit for AMD in 2021, barring unforeseen headwinds.

AMD Capitalizing On Intel Misfires

The chip manufacturer has Dow component Intel Corp. (INTC) to thank for its rising fortunes, with delayed product releases and corporate misfires opening the door for smaller rivals to grab precious market share. New customers are discovering lightning-fast chip sets backed up by glowing reviews, making a return to the old school tech behemoth less likely.  More importantly, INTC is still tripping over its own feet, with no plans to dump ham-fisted management.

President and CEO Lisa Su reiterated her bullish outlook on AMD at Credit Suisse’s 24th Annual Technology Conference on Nov. 30, sharing optimism about the personal computer market and noting new profit opportunities emerging in the near- and medium-term. She also advised the company’s game console portfolio is continuing to while ramp up while they add innovative products in the lucrative graphics and cloud server markets.

Wall Street And Technical Outlook

Wall Street coverage has grown more cautious in reaction to historic share gains, with a ‘Moderate Buy’ rating based upon 13 ‘Buy’ and 6 ‘Hold’ recommendations. One analyst now recommends that shareholders take profits and hit the sidelines. Price targets currently range from a low of $13 to a Street-high $120 while the stock opened Tuesday’s U.S. session about $3 above the median $90 target. Upside may be delayed into 2021, given this elevated placement.

The stock broke out above the 2000 ‘bubble’ high in January 2020 and entered a testing phase that carved an ascending triangle across the contested level. It finally confirmed the breakout in July and took off like a hot rocket, adding nearly 40 points into the September high at 94.28. Rangebound action found support in the 70s in November, yielding an uptick that’s now reached the prior high. Just a small catalyst should be needed at this point to lift price above 100.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Main Trend Changed to Down on Friday

The technology-driven September E-mini NASDAQ-100 Index dropped sharply on Friday as investors fled market-leading tech shares due to mixed earnings reports and growing signs of a worsening coronavirus pandemic, which could exacerbate a deep economic recession. Geopolitical uncertainties also added to investor skittishness ahead of the weekend.

On Friday, September E-mini NASDAQ-100 Index futures settled at 10460.75, down 87.50 or -0.84%.

For the second day in a row, the tech sector weighed heaviest on all three major U.S. stock averages. Intel led the decline on Friday, its shares plunging after the chipmaker reported a delay in production of a smaller, faster 7-nonmeter chip.

In other news, Intel rival Advanced Micro Devices Inc shares jumped, while Tesla Inc extended Thursday’s losses.

Daily September E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trade through 10358.75 on Friday changed the main trend to down. The main trend will change to up if buyers take out the pair of main tops at 11058.00 to 11058.50.

The first short-term range is 9728.75 to 11058.50. Its 50% level at 10393.50 was tested on Friday.

The second short-term range is 9368.25 to 11058.50. Its retracement zone at 10213.25 to 10014.00 is the next downside target zone.

The third range is 8841.00 to 11058.50. Its retracement zone at 9949.75 to 9688.00 is another potential support area.

The combination of the retracement zones creates a potential support cluster at 10014.00 to 9949.75.

Short-Term Outlook

Our best downside target on Monday is 10014.00 to 9949.75. Since it is a potential support cluster, we’re anticipating that counter-trend buyers will show up on a test of this area. This could trigger a technical bounce.

If 9949.75 fails then the market is going to move into the wide retracement zone at 9949.75 to 6988.00. Aggressive counter-trend buyers could step in on a test of this area also.

Despite the change in trend to down, we’re still looking for a labored break because of the large number of retracement levels. This could create choppy, two-sided trading conditions.

For a look at all of today’s economic events, check out our economic calendar.

E-mini S&P 500 Index (ES) Futures Technical Analysis – Confirmed Reversal Top Shifts Momentum to Downside

September E-mini S&P 500 Index futures finished sharply lower on Friday with the broad sell-off blamed on weak earnings, surging coronavirus cases and geopolitical uncertainties.

The S&P Tech Sector weighed heaviest on the benchmark index, led by a decline by Intel Corp. Shares of the chipmaker plunged after reporting a delay in production of a smaller, faster 7-nonometer chip.

On Friday, September E-mini S&P 500 Index futures settled at 3204.00, down 23.50 or -0.73%.

In other news, more than 1,000 Americans died from COVID-19 on Thursday, the third straight day for that grim milestone as total cases surged past 4 million. Meanwhile, Beijing fired back at Washington shuttering China’s Houston consulate by closing the U.S. consulate in the city of Chengdu.

Daily September E-mini S&P 500 Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum shifted to the downside with the formation of the closing price reversal top on July 23 and its subsequent confirmation on Friday.

A trade through 3284.50 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend changes to down on a move through the last main bottom at 3105.25.

The minor trend is also down. This confirms the shift in momentum.

The minor range is 3188.50 to 3284.50. Its 50% level at 3236.50 is resistance.

The short-term range is 3105.25 to 3284.50. Its retracement zone at 3194.75 to 3173.75 is potential support.

A second short-term range is 2983.50 to 3284.50. Its retracement zone at 3134.00 to 3098.50 is another potential support area.

Short-Term Outlook

Since investors have been buying breaks into retracement zones, we’re going to be watching the price action and order flow at 3194.75 to 3173.75 early Monday.

If 3173.75 fails to hold then our next downside target zone becomes 3134.00 to 3098.50. This zone is most important because it is the last potential support zone before the main bottom at 3105.25. Buyers are likely to come in to defend the trend on a test of this zone.

If 3098.50 fails then look out to the downside. The next major support comes in at 2983.50.

For a look at all of today’s economic events, check out our economic calendar.

U.S. Stocks Set To Open Lower As China Orders U.S. To Close Its Consulate In Chengdu

China Decides To Close U.S. Consulate In Chengdu In Retaliation For Closure Of Its Consulate In Houston

China has previously promised to introduce counter-measures after the U.S. ordered closure of the Chinese consulate in Houston.

According to early reports, China was thinking about closing the U.S. consulate in Wuhan.

Such a measure would have been viewed as an attempt to show that the country is ready for counter-measures without dealing significant damage to relations with U.S. since work is hardly active in the place where the coronavirus pandemic emerged.

However, China decided to implement a more hard-line approach, ordering the closure of the U.S. consulate in Chengdu. China argued that some employees of this consulate interfered in its internal affairs.

This move has put markets under pressure, and S&P 500 futures are losing ground in premarket trading.

Intel Under Pressure After Delaying 7-Nanometer Chip Process

Intel has recently reported its second-quarter earnings, beating analyst estimates on both earnings and revenue. However, the stock found itself under major pressure and is losing about 13% during the premarket trading session.

The reason for this weakness is the delay in 7-nanometer chip process, which is now expected to be ready in late 2022 or early 2023.

This delay is a material problem for Intel as it provides time for its competition to get a leading market position. Not surprisingly, AMD shares are gaining more than 6% in premarket trading.

All Eyes On Upcoming PMI Reports

A few minutes after the market open, the U.S. will provide Flash Services PMI and Flash Manufacturing PMI reports for July.

Services PMI is expected to increase from 47.9 in June to 51 in July while Manufacturing PMI is expected to grow from 49.8 to 51.5. Numbers above 50 show expansion.

Earlier, PMI reports for UK easily beat estimates as the country continued to reopen after the acute phase of the coronavirus crisis, and similar results may be reported in the U.S., which could provide some support to the market.

In addition to PMI reports, traders will also have to digest data on New Home Sales for June. After growing by 16.6% on a month-over-month basis in May, New Home Sales are expected to increase by 4% in June.

For a look at all of today’s economic events, check out our economic calendar.

Markets’ Weather Weekly: Сloud-Computing and Office Software Business Missed Quarterly Estimates.

Overview and trends

U.S. weekly jobless claims hit 1.4 million, the first increase since March, as spiking virus cases halt reopening plans.

Microsoft shares tumbled as much as 2.8% on Thursday after its cloud-computing and office software business missed quarterly estimates. The share price slump caused nearly $46 billion dollars erased from the company’s market capitalization. Intel Corporation (INTC) shares were trading lower yesterday despite the company reported better-than-expected second-quarter EPS and earnings results.

As a result, the tech-heavy Nasdaq Composite finished down 2.3%. The S&P 500 closed down 1.2%. It was their worst performance since June 26. The Dow (INDU) fell 1.3%, or 354 points, its worst day in two weeks.

Stocks weren’t the only assets in the red. The US dollar, as measured by the ICE US Dollar Index, fell 0.2%. The index hit its lowest level since September 2018.

So far quarterly earnings come very mixed. On positive side there are good reports and good responses to the earnings reports from IBM (IBM), Texas Instruments (TXN), Biogen (BIIB), KeyCorp (KEY), as well as yesterday’s miracle from Tesla (TSLA) and upbeat sales commentary from Best Buy (BBY).

Then again, a close candidate for why things are “bad” would be the negative responses to earnings reports from Bank of America (BAC), Netflix (NFLX), Snap (SNAP), Capital One (COF), United Airlines (UAL), and Interactive Brokers (IBKR). Microsoft (MSFT) stock sank over 2% after reporting earnings that beat Wall Street expectations in most ways except in a key business. All these stories prompt us to be extremely vigilant, resourceful and contemplative – correct instrument selection and trade direction is key to trading success through this period!

The week was full of important news. US stocks climbed on Wednesday on positive earnings numbers from Microsoft and Tesla and as traders weighed raging tensions between the U.S. and China, a potential legislative extension to unemployment benefits, and coronavirus vaccine news. Donald Trump’s administration ordered the abrupt closure of China’s consulate in Houston, and official Beijing promptly responded with its intention to close the U.S. consulate in Wuhan in a tit-for-tat game condemned by Beijing as outrageous and unprecedented.

The U.S. government has struck an agreement with Pfizer (PFE) and BioNTech (BNTX) for up to 600 million doses of their COVID vaccine candidate should it be approved. This optimistic expectation and early preparation effort have created positive sentiment in terms of thinking about light at the end of the tunnel down the road.

Trading ideas

The Gold/Silver complex has caught renewed bids this week, which was tipped off by the major gold ETF – SPDR Gold Trust – showing up on the “Doji Week” scan back on Monday. The Doji Week scan is designed to find stocks that are in narrow ranges compared to prior week’s activity that is geared up for a stronger directional move.

There are a number of Gold/Silver – related ETFs and stocks appearing on the Wide Range Breakouts, Power Up, and Overbought results today as the market gets behind their momentum against a sliding US Dollar. As investors’ classics – Barrick Gold (GLD) and Newmont Corp. (NEM) – look increasingly overvalued by both investment multiples and technically, new kids on the block, such as Agnico Eagle Mines (AEM) and Kinross Gold (KGC) look increasingly promising. The two latter stocks unveil single digit price-to-sales ratios as opposed to double-digit ones for Barrick and Newmont.

AT&T (T)

The largest American telecom AT&T (T) beat estimates by 4 cents a share, with quarterly earnings of 83 cents per share. Revenue was in line with forecasts. The company said the COVID-19 pandemic impacted results across all its businesses. Thus, WarnerMedia revenue fell 23% to $6.8 billion as the pandemic shut down film production and movie theaters. Group revenue was down 9% YoY to $41 billion, roughly in line with the $41.1 billion consensus. In contrast, AT&T’s HBO Max boasted by around 36 million active customers (including legacy HBO subscribers), picking up 3 million in the quarter. Cash from operations was $12.1 billion with free cash flow of healthy $7.6 billion.

Total dividend payout ratio remains slightly below 50%. Nevertheless, we must not forget about this telecom’s two extremely important properties: number one, it is the value high dividend stocks. And number two, it is classic defensive countercyclical stock. Given increasing odds of exacerbating recession and noting almost ridiculously cheap valuations at P/E of less than 15, dividend yield of 7% and price-to-cash-flow of just 8 (yes, this is a single-digit number, eight), at the current price level AT&T is perhaps one of very few smart medium term buys.

Vladimir Rojankovski, Grand Capital Chief Analyst

US Stock Market: Multiple States Investigate Apple, Disney Delays Major Film Releases, Fear Gauge Rises

Thursday’s U.S. stock market losses led to investors seeking protection in options and Treasurys. This drove the Cboe Volatility Index (VIX) – seen by Wall Street as the market’s best “fear gauge” – to 26 and benchmark 10-year Treasury yields to 0.57%.

Some of the volatility was fueled late in the session by extreme “whipsaw” action. The wild, two-sided trade that steepened the late session selloff was triggered by a report from a watchdog group that said Apple Inc faces consumer protection investigations in multiple states. Apple traded 4.5% lower after the report.

Apple Faces Deceptive Trade Practices Probe by Multiple U.S. States:  Axios

Multiple U.S. states are investigating Apple Inc for potentially deceiving consumers, according to a March document obtained by a tech watchdog group, Reuters reported.

The Texas attorney general may sue Apple for violating the state’s deceptive trade practices law in connection with the multi-state investigation, according to the document, which was obtained by the Tech Transparency Project.

The document did not provide additional details.

The office of the Texas attorney general declined to comment. Apple did not immediately respond to a Reuters request for comment.

Apple has faced class-action lawsuits from consumers alleging that it deceived them about slowing the performance of iPhones with aging batteries. The company agreed to pay up to $500 million to settle one such lawsuit earlier this year.

Apple is also facing lawsuits alleging that it knew and concealed how the “butterfly” keyboards on its MacBook laptops were prone to failure.

Treasury Yields Fall Slightly After Jobless Claims Come in Worse Than Expected

Treasury yields dipped on Thursday after data showed U.S. jobless claims rose more than expected last week. The yield on the benchmark 10-year Treasury note fell one basis point to 0.584% and the yield on the 30-year Treasury bond were also lower at 1.274%. Yields more inversely to prices.

US Companies Making Headlines After Thursday’s Bell

Intel’s stock dropped 8% in extended trading after the company offered disappointing third-quarter guidance. Intel released its second quarter earnings, beating predictions of analysts surveyed by Refinitiv.

After Intel said the company’s 7mm-based CPU product timing is delayed, shares of Advanced Micro Devices climbed 7% in after hours.

Moderna’s stock dropped 2% in extended trading after falling 9.49% earlier in the day. The drop comes after the U.S. Patent and Trademark Office ruled Moderna does not have a claim to a patent held by a rival company.

The ruling could potentially delay Moderna’s race to produce a coronavirus vaccine. Shares of BioNTech jumped 2% while Novavax’s stock fell 1% in after hours.

Disney’s stock fell 1% after the closing bell. The company announced Thursday afternoon that its movie “Mulan” is delayed indefinitely and all Star Wars films and Avatar sequels have been pushed back a year due to theater closures and production shutdowns spurred by the coronavirus pandemic.

For a look at all of today’s economic events, check out our economic calendar.

Intel’s Delay of New 7-Nanometer Chip Raises Concerns; Target Price $45 in a Worst-Case Scenario

Intel Corporation, an American multinational corporation and technology company headquartered in California, said that its new 7-nanometer-based CPU was behind schedule by six months and expect it won’t be ready until late 2022 or early 2023, sending its shares down over 10%.

“Intel has been projecting a front half loaded year since January, and that’s playing out with a strong Q2, but Q3 guidance that we found surprisingly weak, down 8% q/q. 7-nanometer delays are negative for the narrative, but the willingness to outsource could be a watershed transition for the company,” said Joseph Moore equity analyst at Morgan Stanley.

“We had expected this quarter to be a positive catalyst, but we were wrong about that; while this guidance likely remains conservative, conditions still get tougher from here. The company will be entering CY21 with revenues down materially year on year in the early part of the year, with fixed costs rising significantly, coming out of a CPU shortage that helped pricing, with a very strong PC market-creating tough comparisons over the year; we have been 13% below consensus for next year.”

The largest semiconductor company in the world said they have identified a defect mode in their 7nm process that resulted in yield degradation and expect to see initial production shipments of its new 7-nanometer data-centre CPU design in the first half of 2023.

Intel forecasts Q3 revenue to be around $18.2 billion on adjusted earnings of $1.10 a share and updated its 2020 annual revenue guidance to $75 billion. For Q2, Intel reported that its overall revenue and adjusted profits were $19.73 billion and $1.23 a share.

Intel shares sank more than 10% on Thursday, following a 1.1% decline in the regular session to close at $60.40.

Intel stock forecast

Seventeen analysts forecast the average price in 12 months at $63.25 with a high forecast of $82.00 and a low forecast of $45.00. The average price target represents a 2.79% increase from the last price of $61.54. From those 17, eight analysts rated ‘Buy’, seven rated ‘Hold’ and two rated ‘Sell’, according to Tipranks.

Morgan Stanley target price is $61 under the base case, $73 under a bull scenario and $39 under the worst-case scenario. Several other equity research analysts have downgraded their Intel’s stock outlook on Friday. Intel had its price objective slashed by stock analysts at RBC to $48 from $52. Goldman Sachs lowered their price target to $54 from $65 and cut the stock rating to ‘Sell’ from ‘Neutral’. Credit Suisse Group lowered its target price to $70 from $75.

We think it is good to hold for now as 50-day Moving Average and 100-200-day MACD Oscillator signals a mild bearishness.

Analyst view

“Primary revenue drivers are PCs and Data Center, which we estimate flat and increasing low to mid-teens respectively in 2020, driving minimal revenue growth long term. We are reasonably upbeat on the long-term prospects for the Data Center Group, believing that the growth trajectory of the business is in the HSD range,” said Joseph Moore equity analyst at Morgan Stanley.

“Non-PC/server initiatives such as memory are likely to continue to disappoint. Process node transitions take longer; 10nm server has been delayed a number of times now to late 2020.”

Upside and Downside risks

PC and Zen server share gain accelerates as Zen adoption picks up; Intel’s competitive response at 10nm is less impressive than expected. Console cycle turns out to be stronger than expected, Morgan Stanley highlighted as upside risks to Intel.

Intel’s server CPUs for 2020 (Cooper Lake in 1H on 14nm and Ice Lake in 2H on 10nm) stifle AMD’s momentum and allow it to regain share. AMD loses graphics share to NVIDIA. Console cycle underperforms expectations, Morgan Stanley highlighted as downside risks.