Intel Corporation (INTC) exceeded analysts' expectations for Q2 revenue and earnings on July 23. In addition, after excluding a one-time payment, FCF was positive. So, INTC looks cheap. One play is to short out-of-the-money puts.
INTC was down about 4.6% on Friday, July 24, at $92.32, after an initial after-hours jump. The stock is down over a third (-34.5%) from a peak of $140.94 on June 22.
Can’t Get Enough Options?: Join the list for Barchart’s daily unusual options report, delivered free.
INTC stock - last 3 months - Barchart - July 24, 2026 But it could be worth significantly more; analysts have raised their 2027 revenue forecasts, and if it continues to generate positive cash flow, INTC stock could rise. This article will discuss this.
Strong Results
Intel's Q2 revenue was up 25.4% YoY, 11.6% higher than analysts' expectations, according to Seeking Alpha. It was strong across all product lines, especially Foundry production and data center products. In short, demand for its chips from AI-related applications is extremely strong and likely to continue.
Moreover, earnings (on a non-GAAP basis) were up over 100% to 42 cents per share ($0.20) vs. analysts' $0.20 forecast.
After deducting a one-time payment to a private equity fund to buy 100% control of its Ireland fabrication plant, free cash flow (FCF) was strong. This is even though management showed in its presentation that the payment should not be excluded from adjusted FCF figures.
For example, Stock Analysis reported that the Q2 FCF was $4.45 billion. That represents 27.59% of its $16.128 billion in Q2 revenue. Moreover, over the past year, its FCF margin has turned positive at $2.83 billion, or almost 5% of revenue, i.e., a 4.96% trailing 12-month (TTM) FCF margin.
This is likely to continue as management provided a strong earnings outlook. They projected 38 cents per share (EPS) for Q3, which would be significantly higher than last year's 23 cents EPS.
Forecasting FCF and Price Targets
As a result, analysts have now raised their 2027 revenue forecasts. They now project $70 billion in revenue for 2027, up from $66.17 billion as reported in my July 20 Barchart article.
As a result, using an 8.5% FCF margin estimate (well below the Q2 29.59% margin but up from the 5.0% TTM margin, FCF could rise substantially to almost $6.0 billion:
$70.0 billion x 0.085 = $5.95 billion FCF
As a result, using a 1.0% FCF yield (i.e., 100x FCF), Intel's fair market value (FMV) could be worth $595 billion. That is over $129 billion more than its present market cap of $465.7 billion, according to Yahoo! Finance's calculation (i.e., +27.8% higher).
In other words, the price target (PT) for INTC stock is $118 per share, i.e., 27.8% over Friday's closing price of $92.32.
Analysts tend to agree. For example, the average price target (PT) is now $108.62 from 47 analysts (Yahoo! Finance). That's up from $106.70 before the earnings release, as I reported in my July 20 Barchart article.
However, there is no guarantee INTC will rise to this target price. As a result, one alternative play is to sell short out-of-the-money (OTM) puts. Intel's puts have high premiums at lower strike prices well below Friday's close.
Shorting INTC OTM Puts
For example, for the next month (period ending August 28), the $85.00 strike price, almost 8% below Friday's close of $92.32, has a midpoint premium of $5.90. That is a very high premium for this far below the trading price.
It means an investor who posts $8,500 with their brokerage firm can immediately earn $590 after entering an order to “Sell to Open” 1 put at $85.00.
That's a 6.94% one-month yield for short-sellers of this put contract (i.e., $590/$8,500).
INTC puts expiring Aug. 28 - Barchart - As of July 24 This provides a very attractive yield for value investors. For example, if this play can be repeated each month over 4 months, the expected return would be 27.76% (i.e., 6.94% x 4). That's equal to the expected return shown above in holding INTC (27.8%).
Moreover, it allows an investor to have a lower buy-in potentially. For example, if INTC falls to $85.00 by Aug. 28, the investor's breakeven point is $85.00 - $5.90, or $79.10. That's 14.3% below Friday's price of $92.32.
However, the delta ratio, i.e., the chance that INTC could fall to $85.00 by Aug. 28, is relatively high at about 32%. So, a more conservative play is to short the $83.00 put.
That is 10% lower than Friday's close with a lower delta ratio (29%) and provides a 5.963% one-month yield to short-put investors (i.e., $4.95/$83.00). That's only slightly lower than the 6.94% at $85.00. Moreover, the breakeven point is lower at $77.10, or -16.5% below Friday's $92.32 closing price.
The bottom line is that shorting OTM INTC puts is one of the best ways to play Intel, given its upside.
On the date of publication, Mark R. Hake, CFA did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
More news from Barchart
Intel Corp Shows Q2 Results and Free Cash Flow - Shorting INTC Puts is Still the Best Play 3 Unusually Active ETF Options Reveal Bullish, Bearish, and Volatility Bets Texas Instruments Generates Strong Free Cash Flow - But TXN Stock Looks Cheap to Value Buyers Oil’s Surge Sparks Unusually Active Options Bets on Petrobras, Nike, Goldman Sachs and Other 120+ DTEs