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Short Sellers Load Up On Applied Materials And Other Chip Stocks (AMAT, MU, NVDA)

September 12, 2013 12:50 pm
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Among the leading semiconductor stocks, Applied Materials (NASDAQ: AMAT), Micron Technology (NASDAQ: MU) and NVIDIA (NASDAQ: NVDA) saw the most significant rises in short interest between the August 15 and August 30 settlement dates.

The number of shares sold short in Advanced Micro Devices (NYSE: AMD), ARM Holdings (NASDAQ: ARMH), Broadcom (NASDAQ: BRCM), Intel (NASDAQ: INTC), Marvell Technology (NASDAQ: MRVL), Qualcomm (NASDAQ: QCOM) and STMicroelectronics (NYSE: STM) also grew somewhat during that period.

However, short sellers retreated from KLA-Tencor (NASDAQ: KLAC) and Texas Instruments (NASDAQ: TXN) in late August.

Here we take a closer look at how Applied Materials, Micron Technology and NVIDIA and have fared and what analysts expect from them.

See also: Facebook, Zynga Lead Shrinking Short Interest In Social Media

Applied Materials

This equipment and services provider to the semiconductor industry saw short interest grow more than 16 percent in the final weeks of August to 16.06 million shares, taking back much of the 22 percent decline in the previous period. The short interest is still less than two percent of the float.

Applied Materials named a new chief financial officer in mid-August. The company has a market capitalization of about $19 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. The operating margin is better than the industry average, but the return on equity is in the red.

Of the 19 analysts who follow the stock and were surveyed by Thomson/First Call, just eight recommend buying shares. The mean price target, or where the analysts expect the share price to go, is marginally higher than the current share price, as well as less than a recent multiyear high.

The share price is more than 34 percent higher year-to-date, even after pulling back from that multiyear high reached in July. The stock has outperformed the Nasdaq and competitor KLA-Tencor over the past six months.

Micron Technology

This Boise-based semiconductor device maker saw short interest rise about 14 percent to 107.12 million, the highest number of shares sold short in at least a year and more than 10 percent of the float. The days to cover doubled to more than four. Short interest has been rising since the end of June.

Micron Technology is expected to have swung to a profit in the current quarter from a net loss a year ago. The company has a market cap of more than $17 billion. The long-term EPS growth forecast of this S&P 500 component is more than 18 percent. But the operating margin and the return on equity are both in negative territory.

Of the 31 analysts who were surveyed, 16 recommend buying shares, with eight of them rating the stock at Strong Buy. They believe the stock has a little headroom, as their mean price target is more than five percent higher than the current share price. That target would be a new multiyear high, though.

The share price reached a new 52-week high Thursday, and it is now more than 148 percent higher year-to-date. The stock has outperformed the Nasdaq and the Dow Jones Industrial Average over the past six months.


Short interest in this Santa Clara, California-based company increased almost 11 percent in late August to 40.73 million shares. That was more than seven percent of the float, and ended five straight periods of shrinking short interest. The days to cover rose from less than four to more than five.

In late August, NVIDIA announced a gaming alliance with Ubisoft. NVIDIA has a market cap of more than $9 billion and a dividend yield near 2.0 percent. The long-term EPS growth forecast of this S&P 500 component is about 12 percent, and the price-to-earnings ratio (P/E) ratio is less than that of peer Qualcomm.

The consensus recommendation of the 33 analysts polled is to hold shares, and it has been for at least three months. Also, the current share price has overrun their mean price target, meaning that no upside potential is indicated at this time.

Shares reached a new 52-week high Thursday, after climbing more than nine percent in the past month and more than 23 percent year-to-date. Over the past six months, the stock has outperformed competitor Qualcomm and the broader markets, but it underperformed AMD.

See also: Short Sellers Gang Up On Marvell Technology

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

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