Intel Shares Rebound Sharply

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Intel Corporation INTC shares have bounced powerfully off of the scary lows set last Wednesday. The unabated nature of the rally may have some feeling a bit uneasy about buying at current levels.

So, with earnings for the company coming up later this month, is it safe to jump into Intel's pool?

What The Bulls See

  • Some cheap valuation metrics: A price-to-book of 2.76 and a price-to-sales of 2.86.
  • Great 20 percent profit margins that create levered free cash flow of over $10 billion annually.
  • A clean balance sheet: Cash of $15.59 billion versus total debt of $13.27 billion, a debt-to-equity ratio of 23.28 percent and a current ratio of 2.02.
  • A Treasury-beating dividend of 2.8 percent.

What The Bears See

  • A market capitalization of $159.88 billion that trumps the enterprise value of $155 billion.
  • A P/E ratio of around 15 which seems expensive compared to 3 percent estimated revenue growth and 5.4 percent estimated EPS growth for 2015.

Technical Outlook

Technicians note that Intel is on the verge of challenging short-term "correction resistance" at $32.96. If the stock can manage to close above that level, technicians think the stock may well continue higher until it tests the recent highs at $35.62.

On the other hand, if the stock fails to conquer $32.96, this rally off the lows may be characterized as merely a bounce in a bear market. If that is the case, then a move down to a test of last week's low at $29.56 can be expected and a move down to the longer-term uptrend line at $27.00-$27.25 could certainly be in the cards.

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