Market Overview

Short Interest in Chip Makers on the Rise (AMAT, ARM, QCOM)

Semiconductor stocks continued to attract short sellers during the first two weeks of February.

The number of shares sold short in Applied Materials (NASDAQ: AMAT), ARM Holdings (NASDAQ: ARMH), Marvell Technology (NASDAQ: MRVL), Micron Technology (NASDAQ: MU), Nvidia (NASDAQ: NVDA), Qualcomm (NASDAQ: QCOM) and Texas Instruments (NASDAQ: TXN) increased by double-digit percentages between the January 31 and February 15 settlement dates.

Short interest in Broadcom (NASDAQ: BRCM) and Intel (NASDAQ: INTC) also grew somewhat.

The standout was Advanced Micro Devices (NYSE: AMD), which saw its short interest decline during that time, for the second period in a row.

The largest percentage increases in short interest in semiconductor stocks between the January 31 and February 15 settlement dates happened to Applied Materials, ARM Holdings and Qualcomm.

Applied Materials

This equipment and services provider to the semiconductor industry saw short interest rise more than 26 percent in early February to 21.18 million shares. That was on top of a jump of about 40 percent in late January. The number of shares sold short is at its highest in at least a year. But the short interest is still less than two percent of the float.

Applied Materials posted better-than-expected results in its most recent quarterly report and offered optimistic guidance. The company has a market capitalization of more than $16 billion and a dividend yield near 2.6 percent. The long-term earnings per share (EPS) growth forecast of this S&P 500 component is about nine percent. And the price-to-earnings ratio (P/E) ratio is greater than the industry average.

Of the 18 analysts who follow the stock and were surveyed by Thomson/First Call, just seven recommend buying shares. The mean price target, or where the analysts expect the share price to go, is less than six percent higher than the current share price. But that target is a level the share price has not seen since May of 2011.

The share price is almost 15 percent higher year to date, though it has pulled back about two percent from the recent 52-week high. The stock has outperformed the Nasdaq and competitor KLA-Tencor (NASDAQ: KLAC) over the past six months.

ARM Holdings

The number of shares sold short in this multinational semiconductor and software design company rose almost 23 percent to about 6.60 million. The short interest has been rising since the beginning of the year, but it is still around 1.5 percent of the float.

This microprocessor designer has a market cap near $20 billion and a dividend yield of about 0.5 percent. It also offered up better-than-expected quarterly results in early February, and the board proposed a dividend hike. The return on equity is about 14 percent, and the long-term EPS growth forecast is almost 22 percent.

Half of the 10 analysts polled recommend buying shares, while none recommend selling. The current share price has overrun the analysts' mean price target. But the high individual price target suggests about 19 percent upside potential.

The share price is up about 12 percent since the beginning of the year but has plateaued in the past three weeks. Over the past six months, the stock has outperformed Applied Materials, Nvidia and the Nasdaq.

Qualcomm

Short interest in this San Diego-based company swelled more than 19 percent to 15.17 million shares in early February. That is the largest number of shares sold short since mid-December, and it represents about one percent of the float.

In February, Broadcom began selling competing LTE chips, and Qualcomm posted better-than-expected quarterly results at the end of January. Qualcomm has a market cap of more than $114 billion and a dividend yield near 1.5 percent. The long-term EPS growth forecast of this S&P 500 component is more than 14 percent and the P/E ratio is less than the industry average.

Of the 43 analysts surveyed, 13 rate the stock at Strong Buy, and another 24 also recommend buying shares. They believe the shares have some room to grow, as their mean price target is more than 11 percent higher than the current share price. That would be a level the shares have not seen since 2000.

Shares are trading about nine percent higher than six months ago. Over that time, the stock has outperformed Broadcom and the Nasdaq but underperformed Texas Instruments.

Posted-In: Advanced Micro Devices AMD applied materials ARM Holdings broadcom Intel KLA-Tencor Marvell Technology Micron Technology NVIDIA Qualcomm texas instrumentsShort Ideas Trading Ideas Best of Benzinga

 

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