Tech's true bellwether speaks
The market's reaction to Intel's earnings will speak volumes about investor sentiment.
The market's reaction to Intel's numbers will tell us more about the market than about this technology stock. (For more on the prospects for earnings season as a whole, see this post).
I expect good numbers out of Intel. The company finished 2009 with gross margins at a record 65%, thanks to a shift towards more profitable products. With sales of more expensive and higher-margin chips for servers roaring ahead, I expect margins towards the top of the company's usual 50% to 60% range.
Revenue should come in at the top end of guidance of $9.3 billion to $10.1 billion. That would be impressive indeed, since the first quarter is typically a slow one for technology companies. I think earnings are likely to come in a few pennies above the Wall Street consensus of 37 cents a share.
But the stock has moved up in recent weeks until it is just below its $22.75 52-week high.
And remember that I bought this stock for Jubak's Picks on a Jan. 15 selloff after the company reported stellar fourth-quarter 2009 earnings on Jan. 14.
So, I wouldn't be surprised if Intel sold off again Tuesday in the after-hours market and through Wednesday. In fact, I'd be surprised if it didn't. This is the season to sell technology stocks on the theory that this is as good as it gets most years before the September quarter.
But I could be wrong. If Intel doesn't sell off, then the technology sector has more legs than I believe it does right now.
If the stock sells off modestly, then it's business as usual and the market remains what it has been for since the Feb. 8 low -- determined to move up in a steady, what's-the-rush fashion.
If the stock sells off big, however, it's a sign that investors are looking to take profits off the table right now and that they're more nervous about the rally and the economy than they've appeared to be. And that would color my tactics for the other technology stocks in my portfolio as earnings season progresses.
In the case of Intel specifically, however, unless the company delivers surprising fundamental bad news, I'm going to hold on through any post-earnings sell off. I think Intel is in exactly the right place for what looks like a very healthy year-long (and maybe two-year) boom in corporate spending on PCs and servers.
At the time of this writing, Jim Jubak didn't own shares of any company mentioned in this post.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
After enjoying a smooth rise in stock prices since May, investors are about to be hit with another bout of volatility.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.