Short Interest Is Plunging In These 3 Chip Stocks
The short interest in many of the leading semiconductor stocks shrank between the January 15 and January 30 settlement dates. Short sellers retreated especially from Broadcom Corporation (NASDAQ: BRCM), QUALCOMM, Inc. (NASDAQ: QCOM) and KLA-Tencor Corp (NASDAQ: KLAC).
Let's take a closer look at how these three stocks have fared recently and what analysts expect from them. That's followed by a glance at the short interest trends in other chip stocks.
The number of shares sold short in this Irvine, California-based company pulled back almost 22 percent to around 5.72 million in the final weeks of the month. That was only the second time in the past year that short interest was less than 6 million shares. It would take about a day to cover all short positions.
Broadcom beat fourth-quarter estimates in late January. The company has a market capitalization of about $27.2 billion and a dividend yield near 1.3 percent. The long-term earnings per share (EPS) growth forecast is about 11 percent, but the price-to-earnings (P/E) ratio is greater than the industry average.
Of the 41 analysts surveyed by Thomson/First Call, 24 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 a little more than 4 percent higher than the current share price and would be a new 52-week high.
As of Thursday's close, the share price is up about 5 percent year to date, compared to less than 3 percent for the Nasdaq. Shares rose less than 4 percent during the short interest period. The stock has outperformed the broader markets and peer Qualcomm over the past six months, but it also underperformed Texas Instruments.
This maker of semiconductor and LED production equipment saw short interest fall about 20 percent during the period to more than 5.23 million shares, which was more than 3 percent of the float. That was the lowest number of shares short since last July, and the days to cover dropped to more than two.
KLA-Tencor beat quarterly earnings estimates but offered weak guidance during the period. It has a market cap of about $10.4 billion and a dividend yield near 3.2 percent. The operating margin of this S&P 500 component is better than the industry average, and the return on equity is almost 15 percent.
For the past two months, the consensus recommendation of analysts has been to hold shares. But a move to their mean price target would be a gain of almost 9 percent for the shares. Note, though, that shares were trading higher than the consensus target during the short interest period.
Short sellers watched the stock retreat about 8 percent in the latter weeks of the month. The 50-day and 200-day moving averages formed a death cross in the period, and shares are still more than 9 percent lower year to date. Over the past six months, the stock has underperformed competitor Applied Materials.
The number of shares sold short in this San Diego-based company tumbled more than 28 percent to almost 12.72 million shares in the final weeks of January, on the highest average daily volume in a year. That was less than 1 percent of the float, and the lowest level of short interest in the past year.
Qualcomm beat earnings estimates but cut its fiscal-year forecast. It has a market cap of near $116.1 billion and a dividend yield of about 2.5 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 6 percent higher than the current share price. That consensus target is less than 52-week high, though.
The share price dropped more than 12 percent during the short interest period, though it has recovered since. It is still down more than 5 percent year to date. The stock has underperformed smaller competitors Broadcom and Texas Instruments, as well as the broader markets, over the past six months.
Short sellers also appeared to lose interest in Advanced Micro Devices, ARM Holdings, Cirrus Logic, Intel, Marvell Technology, Maxim Integrated Products, Micron Technology, STMicroelectronics and Texas Instruments as the a volatile month in the stock market drew to a close.
However, the number of shares short in Altera, Linear Technology and Xilinx not only grew, but increased by double-digit percentages. Short interest in Applied Materials, Avago Technologies, Lam Research and NVIDIA rose more modestly during the period.
At the time of this writing, the author had no position in the mentioned equities.
Image credit: Milandr, Wikimedia
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