Part 2

Intel Corporation (INTC)

Company Background

An unjustly forgotten giant.

Intel Corporation is an American multinational corporation and technology company headquartered in Santa Clara, California, in Silicon Valley. Intel designs, manufactures, and sells essential technologies for the cloud, smart, and connected devices worldwide. It offers platform products, such as central processing units and chipsets, and system-on-chip and multichip packages, and non-platform or adjacent products comprising accelerators, boards and systems, connectivity products, and memory and storage products.

The company also provides Internet of things products, including high-performance compute solutions for targeted verticals and embedded applications; and computer vision and machine learning-based sensing, data analysis, localization, mapping, and driving policy technology. It serves original equipment manufacturers, original design manufacturers, and cloud service providers.

Current Position – Financial Performance and Future Growth Prospects

As we all know, the tech sector has been on fire with a 52% return in the last 12 months, and a lot of the companies that have outperformed the sector have somewhat stolen the spotlight with their mind-blowing returns. Furthermore, it feels like most of the young, ambitious and hungry retail investors focus their attention only on the current “hot stocks” that are being talked about on TV, Newspapers or Online all the time. This is one of the major reasons why a phenomenal company like Intel Corporation has fallen out of favor, appreciating only 4% YTD. It is important to note though, that the more competitive landscape has not been the only reason for Intel’s stock sluggish performance recently as the company struggled with a shortage of 14-nanometer chips, late deliveries of 10-nanometer chips, and the delayed launch of its upcoming 7-nanometer chips. However, we see most of these issues as short-term hurdles rather, than long-lasting problems that will hinder this giant’s long-term growth.

The senior management of the company has done a wonderful job in adapting to the current fast paced and quickly changing market. The world’s largest semiconductor company and primary supplier of microprocessors and chipsets, has put forth a lot of efforts to gradually reduce its dependence on the PC-centric business by moving into data-centric businesses — such as AI and autonomous driving.

In fact, its data-centric businesses accounted for 48.3% of revenues in fiscal 2019. This underscores the fact that the company’s data-centric businesses are helping it generate revenues close to what it generates from the PC business. The contribution of data-centric businesses to the total revenues has grown gradually over the past five years and should become significant in the near future.

Nevertheless, the company continues to maintain its dominant market share for microprocessors in both consumer and enterprise markets. Management says that the higher-end business in more developed economies continues to look up, but the new strategy should help it get into many more device categories, where Intel products will continue to enjoy a premium based on performance and cost of ownership.

Just to point out to you how big Intel actually is you should keep in mind that the company generated $71.97 billion in revenues in 2019. As a reference, AMD ($6.73 billion) and NVIDIA ($11.72 billion) generated less than $20 billion in total revenues combined throughout 2019.

The key business segments for Intel Corporation are as follows:

Data Center Group (DCG), Internet of Things Group (IOTG), Mobileye, Non-Volatile memory solutions group (NSG) and Programmable solutions Group (PSG) and All Other business units form the crux of Intel’s data-centric business model.

DCG accounted for 33% of revenues in 2019. The segment deals with servers, workstations and other products for cloud, enterprise, and communication infrastructure market.

IOTG offers high-performance compute (HPC) solutions and embedded applications. The segment accounted for 5% of 2019 revenues.

NSG contributed 6% to revenues in 2019. The segment primarily offers memory and storage products like Optane and 3D NAND technology, primarily utilizing SSDs.

PSG segment that accounted for 3% of revenues offers programmable semiconductors, primarily FPGAs and structured ASICs.

Mobileye contributed 1% to revenues in 2019. The segment is engaged in developing computer vision and machine learning-based sensing, data analysis, localization, mapping, and driving policy technology for ADAS and autonomous driving. Intel acquired Mobileye in 2018.

Client Computing Group (CCG), which accounted for 52% of 2019 revenues, is the company’s largest segment. The company is the dominant provider of computer CPUs. It began shipping 10 nanometer (nm) based 10th generation processors (previously referred to as Ice Lake) in 2019.

We know that it seems that Intel may have been late to the mobile market, but in reality the company has wasted no time getting into the Internet of Things. Market research from Gartner, IDC and other independent firms say that this market will see strong growth over the next few years. Intel’s renewed focus on supplying not just chips but associated hardware puts it in a position of strength here. The $16.7 billion acquisition of Altera back in 2015 should also help the company’s future growth prospects. The biggest positive in this respect is the nascent stage of the IoT market, which indicates potential for expanding exponentially.

Technical Analysis

By looking at the daily chart, we can see the strong bullish rally that took the price from the March 23rd lows of around $44 to the June highs at $64, for an outstanding 45% increase in just couple of months. However, the stock didn’t stay there for long as a combination of a high profit taking interest and some further selling pressure took the price down again at the end of July to the $47-48 strong horizontal support zone. Since then, we have seen a volatile and choppy sideways price action between $48-52 levels. The stock is currently sitting at the $54 mark after an attempt to make an upward break out of the above-mentioned range. However, we see multiple different and also strong resistances that are currently threatening the current bullish move. We can find the 100 DMA lying at the $54 mark and the strong horizontal resistance at $56. Today’s price action on the daily chart shows a bearish rejection candlestick, which in turn confirms the strength of the above-mentioned resistances and indicates that there might be further selling pressure ahead. This up move was anticipated as the stock built a meaningful support base around the $48 mark throughout the last couple months. However, we believe that the stock market in the US currently holds a lot of intrinsic risks – COVID-19, the upcoming presidential elections, the economic recovery etc. – which would probably mean that we could be in for a continued sideways and choppy price action in the coming months. At any rate, we our analysis shows that the uneven capital allocation across the different market sectors will continue to support the tech sector as well as the stocks in it. The large institutional investors will start looking for places to reinvest the tremendous profits that they have generated from the likes of ZOOM, TESLA, NETFLIX, Shopify etc. throughout the last 3-6 months, which will lead them to stocks like INTC!

We will start buying aggressively at the key support mark at $52 where lots of buying pressure is expected. In case the price breaks the support and drops further, we will be looking to buy more of the INTC’s stock at the next key support level at $48 where further buying activity is expected to take place and the price is likely to reverse back to the upside from either of these two levels. Our first profit target is set at $65, followed by the next target at $72, where we will be fully cashing in our profits.

We are bullish on the INTC’s stock and believe that any profit-taking corrections would give us a great opportunity to buy the stock at a good discount. This, in turn would give us a chance to maximize our profits to the upside, once the stock resumes its uptrend movement. Furthermore, some of the technical indicators that we are monitoring closely (50 DMA, 100 DMA, Bollinger Bands, RSI etc.) are currently showing exhaustion of the recent up move and are signaling that a potential return-move to the $48-52 range might occur very soon. This will be the right time to jump on the bullish Intel train, that will take you up to the $60 mark in the coming weeks and months.

Take Two Interactive Software (TTWO)

Company Background

Based in New York City, Take Two Interactive Software is a leading developer and publisher of video games.

Take Two’s games can be played on a wide range of different devices including video consoles, personal computers, mobile devices and tablets. The company earns the largest portion of its revenues from the sale of disk-based video game products (known as packaged goods) and downloadable contents (DLCs), but usually smaller segments like subscription, micro-transactions and advertising have seen a major growth improvement recently.

2K’s internally owned and published franchises include BioShock, Mafia, XCOM and Sid Meier’s Civilization. It also publishes externally developed franchises such as Borderlands. Moreover, 2K’s realistic sports simulation titles include NBA 2K series, the WWE 2K series, and the Golf Club.

Take Two’s Private Division is the publisher of Kerbal Space Program.

Social Point develops and publishes popular free-to-play mobile games that include Dragon City and Monster Legends.

The company sells games both physically and digitally through direct relationships with large retail customers and third-party distributors. The most successful customers that Take-Two works with are GameStop, Microsoft, Sony, Steam and Wal-Mart. In fiscal 2020, the five largest customers accounted for 71.5% of net revenues, with Sony and Microsoft each accounting for more than 10% of net revenues.

Current position – Financial Performance and Future Growth Prospects

It is important to note that Take Two’s growth is primarily driven by its popular franchises — Grand Theft Auto (GTA) and Red Dead Redemption. Notably, GTA generated 23% of net revenues in fiscal 2020. However, at the same time this could also prove to be one of the biggest risks for the company, as when you rely to that extent on a single product, you become dependent on the success of that individual product. Sid Meier’s Civilization VI also outperformed management’s expectation owing to its expansion packs and the popularity of the Nintendo Switch skew. The company’s portfolio strength and robust slate of releases, including Borderlands 3, Ancestors: The Humankind Odyssey and The Outer Worlds, are key catalysts for the long haul.

The growing traction in NBA franchise bodes well for the company. Take Two expects NBA 2K net bookings to continue the momentum owing to strong growth in recurrent consumer spending, which increased 29% year over year in fiscal 2020. Meanwhile, NBA 2K Online was the most played PC game in China and the franchise has about 49 million registered users, which is expected to drive recurrent consumer spending. Moreover, the NBA 2K League started its 2020 regular season on May 5, 2020 with at least six weeks of remote gameplay after coronavirus lockdown. This is expected to further boost top-line growth in the near term.

Take Two reported net revenues of $3.08 billion for fiscal 2020. The U.S. accounted for 57% of revenues, while the rest came from International operations. Channel-wise, digital online contributed 77% to net revenues, while the rest came from Physical retail and other segment. The main brands and labels that the company uses to develop and publish its games are Rockstar Games, 2K, Private Division and Social Point.

Rockstar Games is probably the real “rockstar” of them all as it publishes Grand Theft Auto (GTA) and Red Dead Redemption among others.

On Feb 7, 2020 Take Two’s Grand Theft Auto V became the best-selling game of the past decade while Red Dead Redemption 2 became the best-selling game in the past four years. Both the games sold more than 150 million units worldwide combined since their launch.

Technical Analysis

By looking at the daily chart, we can see the strong bullish rally that has occurred in the last 6 months taking the price from the March 23rd lows of around $100 to the highs at $180, thus representing an 80% increase in couple of months. The all-time highs were reached in the beginning of August and ever since then, we have seen a volatile correction taking the price down with over 15% in less than 2 months. Recently, the price has started recovering its prior uptrend after rebounding from the strong support area around $150. ImageUpload an image file, pick one from your media library, or add one with a URL.UploadMedia LibraryInsert from URLParagraph.

We will start buying aggressively at the key support mark at $156 where lots of buying pressure is expected. In case the price breaks the support and drops further, we will be looking to buy more of the TTWO’s stock at the next key support level at $148 where further buying activity is expected to take place and the price is likely to reverse back to the upside from either of these two levels. Our first profit target is set at $182, followed by the next target at $190, where we will be fully cashing in our profits.

The stock is currently sitting at the $170 mark after rebounding from the strong diagonal, horizontal and dynamic trendline support at $150. The initial downward correction was anticipated back in July as nothing can go up or down in a straight line forever and after the strong bullish rally in the first 3 months following the horrendous price declines in March, it was more than normal for us to see that downward corrective movement. While we believe that the stock market in the US is currently holding a lot of intrinsic risks – COVID-19, the upcoming presidential elections, the economic recovery etc. – and that we could be in for a sideways and choppy price action in the coming months, we see the winners continuing to win. We remain cautiously bullish on the TTWO’s stock and believe that any profit-taking corrections would give us a great opportunity to buy the stock at a good discount. This, in turn would give us a chance to maximize our profits to the upside, once the stock resumes its strong uptrend. Furthermore, some of the technical indicators that we are monitoring closely (50 DMA, 100 DMA, Bollinger Bands, RSI etc.) are currently showing that the price might not have enough steam to break the current diagonal trendline resistances that it faces. The exhaustion of the recent up move could be signaling that a potential short-term decline could be just around the corner. Thus, we are not advising our followers to go ahead and start buying the stock right now at its current highs, but to rather wait for a better entry point that we believe will present itself in the coming days and weeks.

Additionally, we should always remember that the XLC and XLK share a very strong 10-year positive correlation of 90%, which following DowExpert’s investment philosophy means that if one of the two ETFs issues a signal there is a 90% probability that the other ETF will follow suit. Thus, we believe that the broad economic weakness in the US and the uncertainty surrounding the process of recovering to pre-COVID-19 levels in terms of productivity, job creation, consumer spending and inflation, will be the driving fundamental forces behind the expected short-term market declines in the coming days and weeks. As a result of that, we expect TTWO’s stock to move lower in the coming weeks with an initial downside target at the $160 level and a secondary target at $150 before resuming its stronger long-term uptrend. This should be treated as a great long-term buying opportunity for our followers.

We at Dow Experts enjoy analyzing the market and helping our followers maximize their profitability by following our trading and investing ideas, which are always supported by our rational investment approach.



Sincerely,

This image has an empty alt attribute; its file name is logo.svg

Add a comment