It looks like more investors are starting to become bullish over Intel Corporation (NASDAQ:INTC). The number of calls for the stock soared past the number of puts this week. Also analysts at RBC Capital Markets say they expect the chip maker to come out ahead of Wall Street’s gross margin estimates for the third and fourth quarters of the year.
Intel’s Puts And Calls
CNBC Fast Money contributor Pete Najarian noted that OptionMonster’s scanners saw trading volume on the June 23 calls and the July 25s, rolling positions out to higher strikes and longer contracts. The calls enable traders to lock in the price where shares of Intel Corporation (NASDAQ:INTC) can be bought, thus helping track movements in the company’s stock price in order to take advantage of a rally.
According to Najarian, on Thursday there were almost 99,000 calls for Intel Corporation (NASDAQ:INTC) traded compared to fewer than 28,000 puts, a clear sign that bulls are starting to be interested in the company’s stock.
Gross Margin Estimates At Intel
RBC Capital analyst Doug Freedman issued a report to investors this week explaining Intel’s gross margins and looking at all of the “many moving parts.” Intel Corporation (NASDAQ:INTC) does break down all of its moving parts in every quarterly earnings release, and the analysts are looking especially closely at Intel’s gross margins.
Intel guided for second quarter gross margins to be around 58 percent or 180 basis points sequentially. They expect the company’s gross margins will lift, possibly more than expected in the second half of the year. They have estimated third-quarter gross margin estimates of 62.6 percent, compared to Wall Street’s estimate of 60.6 percent. For the fourth quarter, they modeled 65.3 percent gross margins, compared to Wall Street’s expected 61.7 percent.
Second Half Of The Year Is Good For Intel
The analysts said the second half of this year looks bright for Intel Corporation (NASDAQ:INTC) because the company’s startup costs and excess inventory charges will start rolling off. Like Goldman Sachs analysts, they believe Intel will receive a big benefit from significant cuts in capital expenditures as those startup costs start to roll off. This could be one of the reasons we’re seeing greater trading volume in Intel shares because investors view these expense cuts as a positive.
They also believe that Wall Street is underestimating just how much compression Intel Corporation (NASDAQ:INTC) has had in its gross margins, largely because of the additive impacts from both the startup and excess inventory charges over previous quarters. In their view, they believe that the combined charges are compressing the company’s first quarter 2013 gross margins by as much as 600 basis points.
Strategic Promise For Intel
RBC Capital analysts said they also see some shifts in Intel Corporation (NASDAQ:INTC)’s business model under the company’s new management. They expect that the chip maker will begin to gain traction in mobile computing, even saying that “the magnitude of design wins may be surprising to investors.” Of course they say the downward trajectory of the PC market is the greatest risk to Intel, but they believe the company is becoming a more vertical company and also beginning to shift some of its weight away from the PC market and over to software.
The analysts also believe investors are underestimating the company’s potential for success in the tablet and handset market, largely because Intel Corporation (NASDAQ:INTC) won’t be putting out its Atom chips until next year.