Semiconductor Short Sellers Get Selective

Short interest among the leading semiconductor stocks was mixed again in late February. On the whole, swings to the downside were more severe between the February 13 and February 27 settlement dates, as evidenced by Broadcom Corporation BRCM, Cirrus Logic, Inc. CRUS and Maxim Integrated Products Inc. MXIM.

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 chip stocks.

Broadcom

The number of shares sold short dropped about 22 percent to nearly 5.04 million in the final weeks of the month. That was around 1 percent of the float, as well as the lowest level of short interest in at least a year. At the current daily average volume it would take less than a day to cover all short positions.

Broadcom announced a platform for extending battery life of wearables during the period. The company has a market capitalization of less than $27 billion and a dividend yield near 1.3 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 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 about 6 percent higher than the current share price, and it would be a new 52-week high.

The share price is up less than 3 percent year-to-date, about the same as the Nasdaq. Broadcom shares pulled back marginally during the short-interest period. The stock has outperformed peers Qualcomm and the broader markets over the past six months, but also underperformed Texas Instruments.

See also: First Solar, Vivint Solar Lead Short Interest Trend

Cirrus Logic

Short interest in this fabless semiconductor company plunged more than 35 percent during the period to around 3.46 million shares. That was by far the smallest number of shares short in the past year, and it represents less than 6 percent of the float. The days to cover remained a little more than six.

This Austin, Texas-based integrated circuits maker has a market cap of a little over $2 billion. Note that the P/E ratio is higher than the industry average, and the long-term EPS growth forecast is less than 8 percent. Yet double-digit earnings growth is forecast for the current quarter and the full year.

The consensus recommendation of the polled analysts recently shifted from holding Cirrus shares to buying them. There are no longer any Underperform ratings listed. Yet a move to their mean price target would be a gain of less than 3 percent for the shares. That consensus target would be a new 52-week high, though.

Short sellers watched the stock rise less than 3 percent in the short-interest period, though it has climbed more than 11 percent since. Over the past six months, the stock has outperformed larger competitors STMicroelectronics and Texas Instruments, as well as the broader markets.

Maxim Integrated Products

The number of shares sold short in this San Jose, California-based company shrank more than 19 percent to almost 6.57 million in the final weeks of the month. That was more than 2 percent of the float, as well as the lowest level of short interest since last September. The days to cover was more than four.

The company has a market cap near $10 billion and a dividend yield of about 3.1 percent. The P/E ratio is less than the industry average, and the operating margin is greater than the industry average. Revenue declines of more than 4 percent are forecast for the next quarter and the full year.

The consensus recommendation of the analysts that were surveyed is to hold shares, and it has been so for at least three months. So perhaps no surprise that their mean price target is about the same as the current share price, which indicates that there is no upside potential at this time.

The share price pulled back less than 2 percent during the short-interest period, though it has recovered since. It is more than 10 percent higher year-to-date. The stock has outperformed competitor STMicroelectronics and the broader markets over the past six months, although it has underperformed Analog Devices.

See also: Shrinking Short Interest In Social Media Stocks

And Others

Others that also saw double-digit percentage decreases in the number of shares short during the period include Avago Technologies, KLA-Tencor and Marvell Technology. Short sellers also appeared to lose interest in Advanced Micro Devices, Altera, Linear Technology, Micron Technology, Texas Instruments and Xilinx as the shortest month wound down.

On the other hand, short interest in Lam Research and STMicroelectronics ended the two-week period about where they began. Short interest in Applied Materials, ARM Holdings, Intel, NVIDIA and Qualcomm grew somewhat during the period.

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

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