Market Overview

Big Short Interest Swings in Chip Makers (ARMH, MU, NVDA)

The largest percentage swings in short interest in semiconductor stocks between the February 28 and March 15 settlement dates happened to ARM Holdings (NASDAQ: ARMH), which tumbled more than 42 percent, as well as to Micron Technology (NASDAQ: MU) and Nvidia (NASDAQ: NVDA), which jumped about 14 percent and more than 30 percent, respectively.

The number of shares sold short in Advanced Micro Devices (NYSE: AMD), Intel (NASDAQ: INTC), Qualcomm (NASDAQ: QCOM) and Texas Instruments (NASDAQ: TXN) also grew somewhat during that period.

But Applied Materials (NASDAQ: AMAT), Broadcom (NASDAQ: BRCM), KLA-Tencor (NASDAQ: KLAC) and Marvell Technology (NASDAQ: MRVL) saw declines in the number of shares sold short between the February 28 and March 15 settlement dates.

ARM Holdings

The number of shares sold short in this multinational semiconductor and software design company declined more than 42 percent to about 3.07 million. The short interest is less than one percent of the float, and the lowest it has been in at least a year. Days to cover dropped to less than two.

This microprocessor designer has a market capitalization of less than $20 billion and a dividend yield of about 0.6 percent. Analysts expect to see more than 20 percent year-over-year growth in revenue when ARM Holdings reports results for the current quarter. The return on equity is about 14 percent, and the long-term earnings per share (EPS) growth forecast is almost 22 percent.

Six of the 11 analysts who follow the stock and were surveyed by Thomson/First Call recommend buying shares. None recommend selling them. But the analysts' mean price target suggests only marginal upside potential. And note that the mean target is less than the recent multiyear high.

Shares have traded mostly between $40 and $44 since early January. But the share price is up more than 51 percent from six months ago. In that time, the stock has outperformed Applied Materials, Nvidia and the Nasdaq.

Micron Technology

This Boise-based semiconductor device maker saw short interest rise about 14 percent in early March to 83.50 million shares. That was the largest number of shares sold short in at least a year. The short interest has been rising year-to-date and now is more than eight percent of the float.

Micron Technology saw bullish option activity ahead of its most recent earnings report, but Jim Cramer recommended selling shares. 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 about 14 percent. But the operating margin and the return on equity are both in negative territory.

Of the 27 analysts who were surveyed, all but seven recommend buying shares, 10 of them rating the stock at Strong Buy. But the mean price target, or where the analysts expect the share price to go, is less than three percent higher than the current share price. That target is about the same as the 52-week high.

The share price reached that 52-week high following the most recent quarterly report, and it is now more than 50 percent higher year to date. The stock has outperformed the Nasdaq and the Dow Jones Industrial Average over the past six months.

Nvidia

Short interest in this Santa Clara, California-based company swelled more than 30 percent in the first weeks of March to 21.60 million shares. That is the second largest number of shares sold short so far this year, and it represents more than three percent of the float. Days to cover rose to more than two.

In early March, Nvidia's GTX Titan was widely sold out, and its Tegra 4 reportedly outperformed Qualcomm's Snapdragon. Nvidia has a market cap of almost $8 billion and a dividend yield near 2.4 percent. The long-term EPS growth forecast of this S&P 500 component is more than 10 percent, and the price-to-earnings ratio (P/E) ratio is less than the industry average.

The consensus recommendation of the 33 analysts polled is to hold shares, and it has been for at least three months. They believe the shares have some room to grow, as their mean price target is more than 10 percent higher than the current share price. However, that target is less than the 52-week high from almost a year ago.

Shares have traded mostly between $12 and $13 since last October, and the share price is more than 15 percent lower than a year ago. Over the past six months, the stock has underperformed competitor Qualcomm but outperformed AMD.

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

 

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