Broadcom, Nvidia See Upswings in Short Interest

By Benzinga | May 28, 2013 AAA

The largest percentage upswings in short interest in semiconductor stocks between the April 30 and May 15 settlement dates happened to Broadcom (NASDAQ: QCOM).

The number of shares sold short in ARM Holdings (NASDAQ: MU) also grew somewhat during that period.

However, Advanced Micro Devices (NYSE: AMD), Applied Materials (NASDAQ: AMAT), Intel (NASDAQ: INTC) and Texas Instruments (NASDAQ: TXN) saw modest declines in the number of shares sold short in the early part of May.

Broadcom

Short interest in this Irvine, California-based company swelled more than 20 percent to 8.98 million shares in the first weeks of May. That is the largest number of shares sold short in at least a year, but it represents less than two percent of the float. The days to cover is less than two.

In May, Broadcom expanded its WICED product line and its board voted to keep the dividend rate steady. Broadcom has a market capitalization of more than $20 billion and a dividend yield near 1.2 percent. The long-term earnings per share (EPS) growth forecast of this S&P 500 component is around 15 percent, and the price-to-earnings ratio (P/E) ratio is in line with the industry average.

As of last check, 15 of the 46 analysts surveyed by Thomson Reuters/First Call rate the stock at Strong Buy and another 24 also recommend buying shares. They believe the shares have some room to grow, as their mean price target is more than 10 percent higher than the current share price. That would be a level the shares have not seen since April of 2011.

The share price has risen more than 12 percent in the past few weeks, though it has pulled back more than two percent from a recent 52-week high. Over the past six months, the stock has underperformed Texas Instruments and the Nasdaq but it has outperformed Qualcomm.

Nvidia

Short interest in this Santa Clara, California-based company rose more than 22 percent during the period to more than 31.68 million shares. That was the largest number of shares sold short in the past year, and it represents more than five percent of the float. Days to cover rose to more than three.

In May, Nvidia posted better-than-expected first-quarter results, and it began taking preorders for its handheld gaming device. Nvidia has a market cap of more than $8 billion and a dividend yield near 2.1 percent. The long-term EPS growth forecast of this S&P 500 component is more than 11 percent, and the P/E ratio is less than the industry average.

The consensus recommendation of the analysts polled is to hold shares, and it has been for at least three months. And their mean price target, or where analysts expect the share price to go, is only marginally higher than the current share price, as well as less than the recent 52-week high.

Shares are trading about seven percent higher than a month ago, despite pulling back less than three percent in the past week. The stock has outperformed competitor Qualcomm and the Nasdaq over the past six months, but it has narrowly underperformed Intel.

Qualcomm

Short interest in this San Diego-based company was more than 19 percent higher than in the previous period to 16.95 million shares. That is the largest number of shares sold short since last November, and it represents about one percent of the float. Days to cover was less than two.

Qualcomm has a market cap of about $111 billion and a dividend yield near 2.2 percent. It recently named a former CEO of Palm to its board. The long-term EPS growth forecast of this S&P 500 component is more than 15 percent. The operating margin is better than the industry average and the return on equity is about 18 percent.

The surveyed analysts' consensus recommendation remains to buy Qualcomm shares. Their mean price target indicates about 14 percent potential upside, relative to the current share price. That would be a level the shares have not seen since April of 2000.

Shares are trading in the same neighborhood they were in at the beginning of the year; they have faced resistance near $67 since early February. Over the past six month, the stock has underperformed peers Broadcom and Texas Instruments, as well as the broader markets.

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