Why Short Sellers Have Piled On Skyworks Solutions And Other Chip Stocks

• Short sellers focused on three semiconductor stock after recent earnings.
• One analyst has just bucked investor sentiment on one of these stocks.
• The share price of two of them have grown handily and the other dropped sharply.

A CLSA analyst may have found cause to upgrade Skyworks Solutions Inc SWKS and and raise its price target, but that ran counter to investor sentiment after the recent earnings report. And the latest short interest data reveal short sellers found the stock of particular interest between the July 15 and July 29 settlement dates too, but for a different reason: betting against it.

Massachusetts-based analog semiconductor producer and Apple Inc. AAPL supplier Skyworks saw the number of its shares short jump more than 35 percent to almost 11.24 million shares in the last half of the month. That was 5.9 percent of the total float, as well as the highest level of short interest since last February. At the most recently average daily volume, it would take less than three days to cover all short positions.

Skyworks shares sold off despite the solid earnings report due to inventory concerns, and they have yet to recover. The share price was up more than 5 percent before the report but ended the two-week short interest period down about 2 percent. The stock is down more than 13 percent since the beginning of the year.

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Overall, short interest moves among the leading semiconductor-related stocks was mixed in the final weeks of last month, with some strong swings both upward and down. Skyworks wasn't alone in catching the eye of short sellers. Marvell Technology Group Ltd. MRVL and QUALCOMM, Inc. QCOM also saw double-digit percentage gains in the number of their shares sold short.

On top of a more than 5 percent gain in the previous period, fabless semiconductor provider Marvell's short interest surged more than 36 percent to around 10.05 million shares. That was the first time since February that the number of shares short was above 10 million, and it was 2.3 percent of the float. A spike in the average daily volume to a year-to-date high allowed the days to cover to fall to less than one.

A digital communication technology based in San Diego, Qualcomm saw the number of its shares short jump from around 18.08 million in the previous period to almost 21.22 million by the end of last month. That was 1.4 percent of its total float, and it was the third straight period of rising short interest. At the most recently average daily volume, it would take less than two days to cover all short positions.

Like Skyworks, both companies reported earnings in the period. Marvell posted disappointing quarterly results, prompting Citigroup to call it overvalued. But Qualcomm crushed expectations in its report, and shares were added to the Goldman Sachs Conviction Buy list.

Short sellers watched the shares of both companies rise between the settlement dates, Marvell by more than 17 percent and Qualcomm by more than 13 percent. The Nasdaq gained less than 3 percent in those two weeks. Note, however, that both stocks have cooled off somewhat since then.

Year-to-date, both stocks now are more than 23 percent higher, compared to the rise in the Nasdaq of only less than 4 percent, as well as the double-digit decline for Skyworks shares.

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Other leading semiconductor stocks that short sellers favored late last month include Advanced Micro Devices, Analog Devices, Micron Technology and Xilinx. There was hardly in change in the number of Lam Research, Microchip Technology and Texas Instruments shares short.

Applied Materials, ARM Holdings, Broadcom, KLA-Tencor, Linear Technology, NVIDIA, NXP Semiconductors and Qorvo had double-digit percentage declines in their short interest during the latest settlement period. And short sellers shied away from Intel and Maxim Integrated Products more modestly.

At the time of this writing, the author had no position in the mentioned equities.

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