Market Overview

Short Sellers Retreat from Micron Technology, Other Semiconductor Stocks

The largest percentage swings in short interest in semiconductor stocks between the April 15 and April 30 settlement dates happened to Advanced Micro Devices (NYSE: AMD) and KLA-Tencor (NASDAQ: KLAC), which saw drops of around six percent, and Micron Technology (NASDAQ: MU), which plunged more than 22 percent.

Intel (NASDAQ: INTC), Nvidia (NASDAQ: NVDA) and Texas Instruments (NASDAQ: TXN) also saw modest declines in the number of shares sold short in the latter part of April.

However, the number of shares sold short in Applied Materials (NASDAQ: AMAT), ARM Holdings (NASDAQ: ARMH), Broadcom (NASDAQ: BRCM), Marvell Technology (NASDAQ: MRVL) and Qualcomm (NASDAQ: QCOM) grew somewhat during that period.

Advanced Micro Devices

This Sunnyvale, California-based company saw short interest pull back about six percent in late April to 96.06 million shares from what had been a year-to-date high in the previous period. The number of shares sold short represents about 16 percent of the float. Days to cover is about five.

AMD launched the world's fastest graphics card in late April and it also posted better-than-expected first-quarter revenue. The company has a market capitalization of almost $3 billion, but it does not offer a dividend. Note that the long-term earnings per share (EPS) growth forecast is less than three percent and the return on equity is in negative territory.

The consensus recommendation of analysts who follow the stock and were surveyed by Thomson/First Call has been to hold shares for the past three months. The current share price is higher than their mean price target, meaning they see no potential upside at this time. The street-high target suggests more than 22 percent upside.

The share price is more than 52 percent higher than a year ago, most of that gain coming in the past two weeks. But that is still well below the 52-week high. Over the past six months, the stock has outperformed competitors Intel and Nvidia, as well as the broader markets.

KLA-Tencor

This maker of semiconductor and LED production equipment saw short interest pullback about another six percent during the period to 3.82 million shares. The number of shares sold short has been shrinking since mid-February. The short interest was more than two percent of the company's float.

KLA-Tencor posted net income and revenue declines for the most recent quarter, which was followed by an analyst's downgrade. The company has a market cap of about $9 billion and a dividend yield near 2.9 percent. The long-term EPS growth forecast of this S&P 500 component is about 10 percent. The operating margin is better than the industry average, and the return on equity is almost 20 percent.

Of the 16 polled analysts, 12 recommend buying shares, while just one rates them at Underperform. The mean price target, or where the analysts expect the share price to go, is more than eight percent higher than the current share price. That target would be a new multiyear high.

Note that shares have traded mostly between $52 and $56 since mid-January. But the share price is more than 17 percent higher than six months ago. In the time, the stock's performance has been in line with the broader markets, though it has underperformed competitor Applied Materials.

Micron Technology

This Boise-based semiconductor device maker saw short interest plunge more than 22 percent to 66.31 million shares from a year-to-date high in the previous period. That end-of-April figure was the smallest number of shares sold short since mid-February. The days to cover is still more than two.

Micron Technology announced a partnership with Intermolecular (NASDAQ: IMI) in April. The company has a market cap of a little more than $10 billion. The long-term EPS growth forecast of this S&P 500 component is more than 14 percent. But the operating margin and the return on equity are both in negative territory.

Of the 29 analysts who were surveyed, 20 recommend buying shares, with 10 of them rating the stock at Strong Buy. They believe the stock has some headroom, as their mean price target is more than seven percent higher than the current share price. That target would be a new 52-week high.

The share price reached a new 52-week high today, and it is now more than 61 percent higher year-to-date. The stock has outperformed the Nasdaq and the Dow Jones Industrial Average over the past six months.

Posted-In: Advanced Micro Devices AMD applied materials ARM Holdings broadcomLong Ideas Short Ideas Trading Ideas Best of Benzinga

 

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