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Short Sellers Pile On Qualcomm

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Short Sellers Pile On Qualcomm

By and large, short sellers got out of the way of the leading semiconductor-related stocks between the May 15 and May 29 settlement dates, as consolidation in the industry was the focus.

However, Intel Corporation (NASDAQ: INTC) and Linear Technology Corporation (NASDAQ: LLTC) bucked that trend, and QUALCOMM, Inc. (NASDAQ: QCOM) saw a massive surge in the number of its shares sold short.

Below we take 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.

Intel

The number of shares sold short in this chip giant rose around 5 percent to about 116.08 million shares in the final weeks of the month. That was more than 2 percent of the float, and the highest level of short interest since March. It would take more than four days to cover all short positions.

Speculation about a buyout of Altera resumed during the two-week period. Intel has a market capitalization of more than $148 billion and a dividend yield of about 3.0 percent. The price-to-earnings (P/E) ratio is less than the industry average, and the return on equity is almost 21 percent.

Of the 47 analysts polled by Thomson/First Call, 23 recommend buying shares, while 17 recommend holding them. They believe the shares have some head room, as their mean price target, or where the analysts expect the share price to go, is more than 9 percent higher than the current share price.

Short sellers watched shares rise more than 3 percent during the settlement period, though it has pulled back more than 6 percent since, as of Friday's close. The stock has underperformed not only the broader markets over the past six months, but also competitors AMD and Texas Instruments.

See also: Big Biotech Stocks See Declining Short Interest

Linear Technology

The number of shares short in this integrated circuit maker rose less than 3 percent in late May to around 12.18 million, or more than 5 percent of the float. Short interest has seesawed over the past couple of months. At the current average daily volume, the days to cover is more than seven.

Linear Technology is among the chipmakers expected to benefit from the coming boom in smartcars. Its market cap is about $11 billion and it has a dividend yield near 2.6 percent. The P/E ratio is less than the industry average, and the return on equity is more than 36 percent.

The consensus recommendation of the analysts surveyed is to hold Linear Technology shares, and that has been the case for at least three months. It is no surprise that their mean price target is less than 3 percent higher than the current share price, nor that shares recently traded higher than that target.

During the two-week period, the share price rose less than 2 percent, but that was better than the Nasdaq. However, it has given up that small gain since. Over the past six months, the stock has underperformed the likes of Analog Devices and Maxim Integrated Products, as well as the broader markets.

Qualcomm

The number of shares sold short in this San Diego-based company surged about 252 percent to more than 69.01 million in the latter weeks of May. That was more than 4 percent of the float, and as the daily average volume surged, the days to cover rose to almost five, also a 52-week high.

There were rumors in May that Qualcomm would buy Ambarella. Qualcomm has a market cap of more than $109 billion and a dividend yield near 2.8 percent. The operating margin of this S&P 500 component is much greater than the industry average, and its return on equity is more than 18 percent.

Of the 38 analysts polled, 22 recommend buying shares of Qualcomm, with nine of those rating the stock at Strong Buy. A move to the analysts' mean price target would represent a gain of more than 10 percent for the shares. They have not traded in that neighborhood since early in the year.

The share price began and ended the two-week period in about the same place, though it has retreated more than 4 percent since. The stock has underperformed smaller competitors Broadcom and Texas Instruments, as well as the Nasdaq, over the past six months.

See also: Sharp Drops In Short Interest For SolarEdge, SunEdison

And Others

Short sellers shied away Advanced Micro Devices, Altera, Avago Technologies, KLA-Tencor, Marvell Technology, Micron Technology, Texas Instruments and Xilinx -- and retreated especially from Applied Materials, ARM Holdings, Broadcom, Maxim Integrated Products and NVIDIA -- in late May.

But the short interest in Cirrus Logic, Lam Research and STMicroelectronics ended the period about where it began.

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

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