Market Overview

Rising Short Interest For Broadcom And Other Semiconductor Stocks (BRCM, KLAC, MRVL)

Among the leading semiconductor stocks, Broadcom (NASDAQ: BRCM), KLA-Tencor (NASDAQ: KLAC) and Marvell Technology (NASDAQ: MRVL) saw the most significant rises in short interest between the August 30 and September 13 settlement dates.

The number of shares sold short in Advanced Micro Devices (NYSE: AMD), ARM Holdings (NASDAQ: ARMH), Micron Technology (NASDAQ: MU) and Qualcomm (NASDAQ: QCOM) also grew somewhat.

Short interest in Intel (NASDAQ: INTC) was essentially unchanged from the previous period.

However, short sellers retreated from Applied Materials (NASDAQ: AMAT), LSI (NASDAQ: LSI), NVIDIA (NASDAQ: NVDA), STMicroelectronics (NYSE: STM) and Texas Instruments (NASDAQ: TXN) in early September.

Here we take a closer look at how Broadcom, KLA-Tencor and Marvell Technology and have fared and what analysts expect from them.

See also: Short Interest Soars In Delta Air, Southwest

Broadcom

Short interest in this Irvine, California-based company swelled more than 22 percent to 12.56 million shares in the period, or more than two percent of the float. That was on top of a nine percent rise in the number of shares sold short in the previous period. The days to cover is still about one.

In September, Broadcom acquired LTE assets from Renesas Electronics. Broadcom has a market capitalization of more than $19 billion and a dividend yield near 1.3 percent. The long-term EPS growth forecast of this S&P 500 component is around 14 percent.

Of the 47 analysts surveyed, 11 rate the stock at Strong Buy and another 18 also recommend buying shares. They believe the shares have some room to run, as their mean price target is about 22 percent higher than the current share price. But shares traded higher than that target as recently as July.

The share price is up about six percent in the past month, but still much closer to the 52-week low than the 52-week high. Over the past six months, the stock has not only underperformed the broader markets, but competitors Qualcomm and Texas Instruments as well.

KLA-Tencor

This maker of semiconductor and LED production equipment saw short interest increase almost 23 percent during the period to more than 6.47 million shares, taking back most of the decline in the previous period. That mid-month figure was about four percent of the float. Days to cover was more than four.

Analyst expect to see single-digit revenue growth year-over-year both this year and the next. KLA-Tencor has a market cap of about $10 billion and a dividend yield near 2.9 percent. The long-term EPS growth forecast is more than 15 percent, and the return on equity is about 16 percent.

Of the 18 polled analysts, 12 recommend buying shares, while just one rates them at Underperform. But the mean price target, or where the analysts expect the share price to go, is only about four percent higher than the current share price. The consensus target would be a new 52-week high.

Note that shares have pulled back a bit from a recent 52-week high. The share price is up about 23 percent from the beginning of the year. Over the past six months, the stock has outperformed the broader markets, though it has underperformed competitor Applied Materials.

Marvell Technology

Short interest in this Bermuda-based company was about 19 percent greater than in the previous period to more than 11.77 million shares. That was the highest number of shares sold short so far this year, and more than double the number at the end of July. About three percent of the float was sold short.

This integrated circuits maker has a market cap of less than $6 billion and a dividend yield near 1.9 percent. It is expected to report marginal growth in the top and bottom lines for the current fiscal year. The long-term EPS growth forecast is about 10 percent, but the return on equity is less than six percent.

For at least three months, the surveyed analysts' consensus recommendation has been to hold Marvell Technology shares. The mean price target indicates more than 11 percent potential upside, relative to the current share price. But that consensus target is less than the 52-week high from back in August.

The share price is more than 67 percent higher year-to-date, despite a retreat in the past two weeks. Over the past six months, the stock has narrowly underperformed the likes of LSI, Texas Instruments and the S&P 500, though it did outperform the Nasdaq.

See also: Avon And Rite Aid Still Attracting Short Sellers

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

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

 

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