Qualcomm Bucks Short Interest Trend In Semiconductor Stocks

By and large, short interest in the leading semiconductor stocks shrank between the November 14 and November 28 settlement dates. QUALCOMM, Inc. QCOM was the exception, posting a sizable increase in the number of shares short.

Broadcom Corporation BRCM and STMicroelectronics NV (ADR) STM saw the most significant downswings in short interest.

In the final weeks of the month, short sellers also retreated from:

• Altera Corporation
• Applied Materials, Inc.
• Avago Technologies Ltd
• Cirrus Logic, Inc.
• Intel Corporation
• KLA-Tencor Corporation
• Lam Research Corporation
• Linear Technology Corporation
• Marvell Technology Group Ltd.
• Micron Technology, Inc.
• NVIDIA Corporation
• Texas Instruments Incorporated

Advanced Micro Devices, Inc.; ARM Holdings plc; Maxim Integrated Products Inc. and Xilinx, Inc. saw little change in the number of their shares short from the previous period.

Below is a closer look at how Broadcom, Qualcomm and STMicroelectronics have fared and what analysts expect from them.

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Broadcom

The number of shares sold short dropped about 22 percent to around 8.29 million in the final weeks of the month. That was less than 2 percent of the float, as well as the lowest level of short interest in at least a year. It would take almost two days to cover all short positions.

Broadcom's board of directors declared a quarterly dividend during the period. The company has a market capitalization of more than $25 billion and a dividend yield near 1.1 percent. The long-term EPS growth forecast is about 11 percent, but the price-to-earnings (P/E) ratio is greater than the industry average.

Of the 40 analysts surveyed by Thomson/First Call, 25 recommend buying shares, with 11 of them rating the stock at Strong Buy. Their mean price target, or where analysts expect the share price to go, is less than 5 percent higher than the current share price and would be a new 52-week high.

As of Wednesday, December 10, the share price was up about 44 percent year-to-date, compared to about 12 percent for the NASDAQ. Shares rose less than 2 percent during the short interest period. The stock has not only outperformed the broader markets over the past six months, but also peers Qualcomm and Texas Instruments.

Qualcomm

The number of shares sold short rose less than 8 percent to more than 14.77 million shares in the final weeks of November. That was about 1 percent of the float, and still the second lowest level of short interest in the past year. The days to cover was less than two.

In November, Qualcomm announced plans to make and sell chips for servers. It has a market cap of near $119 billion and a dividend yield of about 2.3 percent. The operating margin of this S&P 500 component is greater than the industry average, and its return on equity is almost 21 percent.

The consensus recommendation of the analysts polled is to buy shares of Qualcomm, and it has been for at least three months. They believe the shares have some head room, as their mean price target is more than 11 percent higher than the current share price. That consensus target is less than 52-week high, though.

The share price rose only marginally during the short interest period, but it is more than 3 percent lower year-to-date and now below the 50-day moving average. The stock has underperformed smaller competitors Broadcom and Texas Instruments, as well as the broader markets, over the past six months.

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STMicroelectronics

Short interest pulled back more than 16 percent in the latter two weeks of the month to more than 2.27 million shares. That also was the smallest number of shares sold short in the past year. It would take more than three days to close out all of the short positions.

During the period, STMicroelectronics was named a Thomson Reuters Top 100 Global Innovator for third year in a row. The company has a market cap of more than $6 billion and a dividend yield near 4.4 percent. The P/E ratio is greater than the industry average and the return on equity is near zero.

For at least three months, the consensus recommendation of analysts surveyed has been to hold shares. Their mean price target is about the same as the current share price, so no upside potential is indicated at this time. A move to the street-high price target would be a more than 17 percent gain, though.

Shares rose more than 6 percent during the two-week period, although they have pulled back a bit since. The share price is more than 7 percent lower year to date. The stock has underperformed not only the likes of Texas Instruments over the past six months, but the NASDAQ and the S&P 500 as well.