AMD competition and China trade woes have created a top for the Dow name
Northland Capital downgraded Intel Corporation (NASDAQ:INTC) to "market perform" from "underperform," and cut its price target on to $42 from $46 -- a more than 16% discount to last night's close at $50.13. The brokerage firm cited weak demand from Apple (AAPL), and said with competition from Advanced Micro Devices (AMD) and U.S.-China trade tensions, it's "as good as it gets" for the Dow stock.
In reaction, INTC stock is down 1.6% to trade at $49.31, slipping back below the round $50 mark. This region coincides with the stock's 200-day moving average and a 50% Fibonacci retracement of its plunge from its early June 17-year peak at $57.60 to its Oct. 24 low of $42.36, and has kept a tight lid on the equity since a late-July bear gap. Year-to-date, Intel is maintaining a roughly 7% gain.
Most analysts are already skeptical of INTC, with 17 of 30 maintaining a "hold" or worse rating. Plus, the average 12-month price target of $54.59 represents a tepid 10.6% premium to current trading levels.
The pessimism has been ramping up in the options pits, too. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), INTC stock's 10-day put/call volume ratio of 0.44 ranks in the 70th annual percentile. While this shows that more calls than puts have been bought to open on an absolute basis, the rate of put buying relative to call buying has been quicker than usual.
Drilling down, the December 47.50 strike is home to peak put open interest in the front-month series, and data from Trade-Alert indicates a 2,500-contract block was bought to open last Monday, Nov. 26, for an initial cash outlay of $360,000 (number of contracts * $1.44 premium paid * 100 shares per contract). This is the most the put buyer stands to lose, should INTC stock remain north of the strike through December options expiration, while profit will begin to accumulate on a move below breakeven at $46.06 (strike less premium paid).