Market Overview

Why Short Sellers Like Maxim Integrated Over Analog Devices

Why Short Sellers Like Maxim Integrated Over Analog Devices
  • Short interest in the leading semiconductor stocks was mixed again in early December.
  • Short sellers piled on Maxim Integrated Products Inc. (NASDAQ: MXIM) in particular during that time.
  • Yet, the number of Analog Devices, Inc. (NASDAQ: ADI) and NXP Semiconductors NV (NASDAQ: NXPI) shares short dropped sharply by mid-month.

By and large, short interest moves in the leading semiconductor-related stocks between the November 30 and December 15 settlement dates were fairly modest. However, there were a few notable exceptions.

Short sellers especially moved on Maxim Integrated Products, though shares of this Apple Inc. (NASDAQ: AAPL) vendor lost only a little ground in the first two weeks of the month.

However, the number of Analog Devices and NXP Semiconductors shares short dropped sharply in the period, particularly in the latter. Note that these two companies are also Apple vendors.

Below is a closer look at how these three stocks have fared recently and what analysts expect from them. That is followed by a glance at the short interest moves in other key chip stocks.

Related Link: 17 Tech Companies That Will Meet With Analysts Next Week

Analog Devices

Though short interest in this integrated circuits maker jumped more than 53 percent during the previous period, the number of shares sold short shrank more than 23 percent to about 6.08 million in early December. That was about 2 percent of the float. The days to cover dropped to less than two.

Analog Devices has a market capitalization of more than $17 billion, with a dividend yield near 2.8 percent. Its operating margin is better than the industry average, but Apple inventory issues led to downgrade in the short interest period.

The consensus recommendation of 30 analysts surveyed by Thomson/First Call is to buy Analog Devices shares. Their mean price target suggests they see more than 15 percent upside in the stock over the next year. However, shares traded higher than that last June.

The share price dropped nearly 7 percent during the first two weeks of December, compared to a loss of less than 3 percent for the Nasdaq. Over the past six months, the stock has underperformed larger competitor Texas Instruments Incorporated (NASDAQ: TXN), as well as the broader markets.

Maxim Integrated Products

Short interest in this Bermuda-based company was more than 23 percent higher than in the previous period to more than 4.81 million shares. That is less than 2 percent of the float. At the average daily trading volume reported, it would take about less than two days to cover all short positions.

An analyst upgrade during the period gave shares a bit of a boost. Maxim's market cap is less than $11 billion and the dividend yield is near 3.2 percent. Its long-term earnings per share (EPS) growth forecast is more than 10 percent and the operating margin is greater than the industry average.

For at least three months, the consensus recommendation of the analysts polled has been to hold the shares, though the number of buy recommendations has increased recently. However, a move to their mean price target would be a gain of less than 2 percent for the shares.

In the two-week short interest period, shares were down more than 6 percent at one point, but recovered much of that loss. The stock has handily outperformed not only the other two stocks featured here, but the Nasdaq as well.

NXP Semiconductors

The 9.74 million shares short as of the middle of the month were down about 47 percent from the previous settlement date. It also was about 5 percent of the float of this Dutch company. The days to cover slipped to less than two, the lowest it has been since last March.

The company benefits from its link to Apple Pay, which should bode well for 2016. The semiconductor manufacturer has a market cap of almost $20 billion. Its long-term EPS growth forecast is almost 25 percent, and the return on equity is more than 100 percent.

All but two of the 25 surveyed analysts recommend buying shares, with 10 of them rating the stock at Strong Buy. They see plenty of room for shares to run, as their mean price target more than 19 percent higher than the current share price.

The share price ended the two-week period more than 6 percent lower, though it has recovered a bit since. The stock has underperformed the broader markets and larger competitor Texas Instruments over the past six months.

Related Link: The Top 20 Wall Street Analysts Of 2015

And Others

The number of shares short in Avago Technologies, Broadcom, Intel, Lam Research, NVIDIA and Texas Instruments grew modestly in the initial weeks of December.

Short interest in KLA-Tencor and Xilinx was essentially flat, relative to the previous settlement date.

Short sellers retreated somewhat from Linear Technology, Micron Technology, Qualcomm and Skyworks Solutions in the period, but especially from Applied Materials and Marvell Technology. The number of their shares short shrank by more than 11 percent.

Disclosure: At the time of this writing, the author had no position in the mentioned equities.
Image Credit: Public Domain


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