Intel ( INTC ), the largest chip maker in the world, raised its outlook for the second quarter and fiscal year yesterday after the market close, on improved business demand for personal computers. While the PC market remains weak, it is showing some signs of improvement.
Intel now expects revenues in the range of $13.4-$14 billion in the second quarter, up from the previous projection of $12.5-$13.5 billion and the Zacks Consensus Estimate of $13.024 billion. The company also sees gross margin improvement of 1% from the prior outlook to around 64%.
For the fiscal year, revenues would increase for the first time since 2011 and gross margin will likely be on the upper end of the previous guidance of 61%, plus or minus a few percentage points. This has spread optimism in the global PC industry after two consecutive years of disappointment (read: Will These Tech ETFs Shine Post Intel Earnings? ).
The move came after the market-research firm IDC slightly revised up its expectation for worldwide PC shipments in 2014 this month. The research firm projects global shipments to fall 6% this year against the 6.1% decline projected in March.
Though consumers are shunning PCs for mobile devices, the boost in demand for Intel's microprocessors will stem from replacement of aging computers that uses Microsoft's ( MSFT ) Windows XP. Driven by encouraging outlook, Intel shares climbed as much as 5.6% in after hour trading, at the Thursday session.
ETFs to Watch
The smooth trading of the stock could also boost the semiconductor ETFs that are heavily invested in this biggest semiconductor company. This is especially true as Intel currently has a Zacks Rank #3 (Hold) and falls in the solid industry, which has a Zacks Industry Rank in the top 18%. This suggests upside momentum in INTC share price and the related ETFs in the coming days.
As such, we have highlighted three ETFs with the highest allocation to INTC that could be big movers post Intel's strong outlook. Investors should closely monitor the movement in these funds and could catch the opportunity from any surge in the INTC price in the coming days (read: A Comprehensive Guide to Semiconductor Industry ETFs ):
Market Vectors Semiconductor ETF ( SMH )
This is easily the most popular and liquid ETF in the semiconductor space with AUM of $386.6 million and average daily volume of roughly 1.45 million shares. The fund provides concentrated exposure to 26 global securities by tracking the Market Vectors US Listed Semiconductor 25 Index. Intel occupies the top position with 18.7% of assets.
While U.S. firms dominate the fund holdings at 75% of assets, Taiwan (12.8%), the Netherlands (8.2%) and United Kingdom (4.5%) take the remainder in terms of country exposure. The fund charges an expense ratio of 0.35%. The fund has added 13.3% in the year-to-date time frame and has a Zacks ETF Rank of 2 or 'Buy' rating with a 'Medium' risk outlook.
iShares PHLX Semiconductor ETF ( SOXX )
This ETF follows the PHLX Semiconductor Sector Index and offers exposure to 31 domestic firms. The fund has amassed $463 million in its asset base and trades in volume of more than 151,000 shares a day. The product charges a higher fee of 47 bps a year from investors (see: all the Technology ETFs here ).
Here again, INTC takes the top spot at 8.19% of total assets. The fund has gained 16.7% so far this year and currently has a Zacks Rank of 2 with a 'High' risk outlook.
First Trust NASDAQ technology Dividend Index Fund ( TDIV )
This fund provides exposure to the dividend payers of the broad technology space by tracking the Nasdaq Technology Dividend Index. The product has amassed about $542.5 million in its asset base while charges 50 bps in annual fees. Volume is good as it exchanges about 146,000 shares in hand per day (read: Dividend ETFs Hitting New Highs ).
In total, the fund holds about 89 securities in its basket. Of these firms, INTC takes the third spot, making up roughly 8.35% of the assets. In terms of industrial exposure, the fund allocates one-fourth portion in semiconductor and semiconductor equipment, followed by technology hardware, storage & peripherals (16.30%) and software (15.32%). The fund is up over 7% year-to-date.
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INTEL CORP (INTC): Free Stock Analysis Report
MKT VEC-SEMICON (SMH): ETF Research Reports
ISHARS-PHLX SEM (SOXX): ETF Research Reports
FT-NDQ TECH DIF (TDIV): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
