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ETFs in Focus as Intel Tops Q3, Stock Slides

Intel INTC, the world’s largest chipmaker, reported solid Q3 results after the market closed yesterday. The company surpassed our estimates for both revenues and earnings but gave a disappointing fourth-quarter revenue outlook.

Intel Q3 Earnings in Focus

Earnings of 80 cents per share came in seven cents higher than the Zacks Consensus Estimate and improved from the year-ago earnings of 66 cents. Revenues rose 9% year over year to $15.78 billion and were well ahead of our estimated $15.55 billion.

Better-than-expected results were credited to record revenues in data center business and Internet of Things as well as improved PC sales. Data center and Internet of Things revenues climbed 10% and 19% year over year, respectively, suggesting Intel's ongoing transformation to the company that powers the cloud and billions of smart, connected devices (read: Invest in the Internet of Things with This ETF).

Further, Intel expects revenues in the range of $15.2–$16.2 billion for the fourth quarter of 2016. The midpoint is well below the Zacks Consensus Estimate of $15.89 billion. The lackluster guidance sent INTC shares plunging nearly 4% in after-market hours on elevated volume.

Time to Buy?

The slide could represent a better bargain opportunity for investors as the stock currently has a compelling valuation with P/E ratio of 14.28, much lower than the industry average of 28.40. In addition, Intel has a top Zacks Rank #1 (Strong Buy) and boasts a solid Industry Rank in the top 10%, suggesting that the stock will outperform in the months to come.

As a result, investors seeking to tap the beaten down prices could consider the ETFs that have a large allocation to the biggest semiconductor company (see: all the Technology ETFs here).

VanEck Vectors Semiconductor ETF SMH

This is one of the popular and liquid ETFs in the semiconductor space with AUM of $492.7 million and average daily volume of roughly 2.9 million shares. The fund provides exposure to 26 global securities by tracking the MVIS US Listed Semiconductor 25 Index. Intel occupies the top position with 15.5% of assets. While U.S. firms dominate the fund’s holdings with 68.9% assets, Taiwan (14.7%), the Netherlands (9.5%) and Singapore (5.5%) round off to the top four in terms of country exposure. The fund charges an expense ratio of 0.35%. The fund has a Zacks Rank of 2 or ‘Buy’ rating with a High risk outlook (read: Semiconductor ETF Hits New 52-Week High).

iShares PHLX Semiconductor ETF SOXX

This ETF follows the PHLX SOX Semiconductor Sector Index and offers exposure to 30 U.S. firms. The fund has amassed $441 million in its asset base and trades in volume of more than 527,000 shares a day. The product charges a higher fee of 48 bps a year from investors. Here, INTC takes the top spot at 8.3% of total assets. The fund has a Zacks Rank of 1 or ‘Strong Buy’ rating with a High risk outlook.

First Trust NASDAQ Technology Dividend Index Fund TDIV

This fund provides exposure to the dividend payers in the technology sector by tracking the Nasdaq Technology Dividend Index. It has amassed about $571.7 million in its asset base and trades in moderate volume of about 77,000 shares per day. The ETF charges 50 bps in annual fees and holds about 98 securities in its basket. Of these firms, INTC occupies the second position, making up roughly 8.3% of the assets. In terms of industrial exposure, the fund allocates more than one-fourth portion in semiconductor and semiconductor equipment, followed by diversified telecom services, software, technology hardware, storage & peripherals, and communications equipment with double-digit exposure each.

First Trust Nasdaq Semiconductor ETF FTXL

This fund offers exposure to the 30 most-liquid U.S. semiconductor securities based on volatility, value and growth by tracking the Nasdaq US Smart Semiconductor Index. Holding 30 stocks in its basket, Intel is the third firm with 8.3% allocation. FTXL has debuted in the space a month ago and has already accumulated $2 million. Average trading volume is light at around 1,000 shares and expense ratio comes in at 0.60%.

PowerShares Dynamic Semiconductors Fund PSI

This fund tracks the Dynamic Semiconductor Intellidex Index, holding 30 securities in the basket. Intel occupies the second position and makes up for 5.3% share in the basket. PSI has lower AUM of $99.6 million and sees a lower average daily volume of about 25,000 shares. It charges 63 bps in annual fees and has a Zacks Rank of 1 with a High risk outlook (read: Will Semiconductor ETFs Shine Again in Q3 Earnings?).

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INTEL CORP (INTC): Free Stock Analysis Report
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