20 Billion Ways That Intel Corporation Is Frying Short Sellers

Don't fight Intel's buyback.

Jul 19, 2014 at 2:00PM

At Intel's (NASDAQ:INTC) earnings release, the company announced that it would be adding $20 billion to its buyback authorization. More importantly, $4 billion of that buyback will be executed in the current quarter alone. Though some may be concerned that Intel is buying shares near all-time highs (and I'll admit that it would have been nice to see this kind of buyback activity when the shares traded in the low $20s), this really is a fantastic, shareholder-friendly move.

Following Apple's lead; Intel stock untouchable by the shorts
If you rewind back to last earning's season, you may remember that Apple increased its buyback authorization to $90 billion, up $30 billion from the prior authorization. Further, the company expects that -- by the end of calendar 2015 -- it will return a whopping $130 billion to shareholders through a combination of dividends and buybacks.

What did Apple stock do following that report? Well, see for yourself:

Buyback Aapl

Source: Google Finance

Since that report, Apple shares -- which were already outperforming the Nasdaq index over the last year -- extended its outperformance. Intel probably wasn't blind to this and probably realized that by putting in such a gigantic buyback authorization, it could make its stock a very unattractive short.

What's next for Intel stock?
Intel's $20 billion buyback is good for about 593 million shares or approximately 12% of the shares outstanding. Intel is probably going to be opportunistic, but at the same time it's very difficult to imagine that the shares would pull back much here. In fact, if anything, Intel is likely to continue to play its game of "under promise, over deliver" and it wouldn't be the least bit surprising to see the company blow past its guidance for the year.

But by far the more important driver of Intel's stock will be the Investor Meeting that will take place this November. At the Investor Meeting, Intel will issue its guidance for 2015 by segment. It is likely that Intel will call for the following:

  • PC share gains. As Intel brings its 14-nanometer Broadwell and Braswell products, it should gain further share against rival Advanced Micro Devices (NASDAQ:AMD), which recently saw its PC chip shipments drop 20% year over year as a result of share loss to Intel.
  • Continued datacenter growth. Intel is likely to guide to another year of double-digit revenue growth in the datacenter. The question will be whether the company guides to low double-digits or mid-teens double digit percentage growth. If the strength in the company's enterprise-focused business seen this quarter extends into next year, then mid-teens percentage growth seems achievable.
  • Mobile loss narrowing. Intel is burning about $4 billion per year in mobile on what is essentially now $0 net revenue. As the contra-revenue offsets associated with tablet shipments goes away next year, and as Intel's LTE modems and cell-phone-oriented apps processor ramp, the company should see meaningful revenue growth and the loss should narrow significantly. The magnitude of which will become clear at the meeting.

All of these factors combined, in my view, should drive about 5-7% revenue growth next year -- likely well above sell-side consensus of 2.70% growth. With the bar for 2015 very low and with a very large buyback program in place, it's hard to see Intel shares trending anywhere but "up" over the next 12-18 months.

Shorting Intel at this point really looks like like trying to short Apple shortly after its blowout results in April -- we all know how well that has worked out!

Leaked: Apple's next smart device (warning, it may shock you)
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Ashraf Eassa owns shares of Intel. The Motley Fool recommends Apple and Intel. The Motley Fool owns shares of Apple and Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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