The notions of a potential takeover bid at chip stock Intel (INTC) has been mounting for days now, but it might actually be derailed by one of the most unlikely factors of all: Advanced Micro Devices (AMD). So how is such a thing even possible? The idea hit Intel stock hard, and shares were down over 5% in Wednesday afternoon’s trading.
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We know that several factors might have put the kibosh on such a deal already. LinkedIn remarks, trying to figure out who gets what, even a more laissez-faire Federal Trade Commission (FTC) getting involved. But the idea that AMD could end up stopping the sale struck a lot of people by surprise.
As it turns out, AMD currently has a “cross-licensing agreement” with Intel that covers a range of products, reports noted. The most recent such agreement was signed back in 2009, the reports noted, and this allows the companies to use each other’s patents. AMD, for example, is allowed you use x86 processors, and Intel can use some AMD designs. But neither can make a processor that works with sockets or motherboards the other makes, and trying to terminate the agreement has some fairly stringent conditions. And if the agreement were terminated, they would need a new one, or risk a whole lot of mutual infringement.
Unexpected Trading
However, an unexpected move has come into play: options data. Reports suggest that there have been 15 unusual trades on Intel recently, and most of them are in the bullish direction. Only two of these trades were puts, and the puts were valued at $177,404.
That’s modest at best, given that a share of Intel is running around $26. But in a major development, the remaining 13 such trades were calls. And the calls carried a total value of $1,061,915. That is nearly a ratio of six to one, suggesting that someone is expecting a major uptick in Intel’s share price in the not too distant future.
Is Intel a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on INTC stock based on one Buy, 27 Holds and five Sells assigned in the past three months, as indicated by the graphic below. After a 40.94% loss in its share price over the past year, the average INTC price target of $22.67 per share implies 13.06% downside risk.
