Market Overview

Short Sellers Finding Much To Like Among Chip Stocks

Short Sellers Finding Much To Like Among Chip Stocks

Short sellers seemed to find much to like among the leading semiconductor-related stocks between the June 15 and June 30 settlement dates. That was particularly true of Maxim Integrated Products Inc. (NASDAQ: MXIM) and Marvell Technology Group Ltd. (NASDAQ: MRVL).

On the other hand, short interest in Altera Corporation (NASDAQ: ALTR) plunged during the final two weeks of the month.

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.


Short interest in this San Jose, California-based company tumbled about 48 percent to about 6.87 million shares in the period. That was more than 2 percent of the float, as well as the lowest number of shares short so far this year. The average daily trading volume hit a three-month low.

Short sellers are getting out of the way ahead of Altera's takeover by Intel. The company has a market capitalization of about $15 billion and a dividend yield near 1.4 percent. This S&P 500 component also has an operating margin that is better than the industry average.

The consensus recommendation of the 23 analysts surveyed by Thomson/First Call is to hold shares. Their mean price target, or where the analysts expect the share price will go, is lower than the current share price, meaning that they see no further upside at this time.

The share price slipped marginally during the two-week period. However, it is still more than 34 percent higher since the beginning of the year, as of Friday's close. The stock has not only outperformed the broader markets over the past six months, but competitors Linear Technology and Xilinx as well.

See also: 9 Top Sell Ideas From Oppenheimer's Technical Analysis Division

Marvell Technology

The number of shares sold short in this San Jose, California-based company jumped more than 34 percent to more than 10.42 million shares in the final weeks of the month. That was more than 2 percent of the float, and it ended three straight periods of shrinking short interest.

Goldman Sachs upgraded the stock from Sell to Neutral during the period. The company has a market cap of more than $6 billion and a dividend yield of about 1.9 percent. The price-to-earnings (P/E) ratio is less than the industry average, but the return on equity is less than 7 percent.

The consensus recommendation of the analysts polled is to hold shares, as it has been for at least three months. However, they believe the shares have some room to run, as their mean price target is about 17 percent higher than the current share price.

The share price dropped more than 6 percent during the settlement period, and it is now down more than 13 percent year to date. Over the past six months, the stock has underperformed both the broader markets and competitors such as Analog Devices and STMicroelectronics.

Maxim Integrated Products

Short interest in this Bermuda-based company was less than 21 percent higher than in the previous period to more than 6.61 million shares, or more than 2 percent of the float. At the average daily volume, it would take about more than two days to cover all short positions.

Lately this integrated circuits maker has been the subject of takeover rumors. Its market capitalization is more than $9 billion and the dividend yield is near 3.4 percent. The company has a long-term earnings per share (EPS) growth forecast of less than 10 percent but a healthy operating margin.

For at least three months, the consensus recommendation of analysts surveyed by Thomson/First Call has been to hold shares. A move to their mean price target would be a gain of more than 9 percent for the shares. However, that consensus target is less than the 52-week high.

In the two-week short interest period, shares rose about 5 percent but gave up most of that gain. They are now up less than 1 percent year to date. The stock has outperformed competitor Texas Instruments over the past six months, though it has underperformed the Nasdaq and the S&P 500.

See also: These 3 Stocks Are Seeing Short-Selling Activity Rise

And Others

Avago Technologies, Texas Instruments and Xilinx also saw double-digit percentage increases in the numbers of their shares short in late June. Short sellers moved more modestly on Broadcom, Intel and NVIDIA.

The short interest in Advanced Micro Devices, Applied Materials, Linear Technology and ON Semiconductor ended the period about where it began. Short sellers shied away Micron Technology, Qualcomm in the period.

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

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