Among the semiconductor stocks, Applied Materials (NASDAQ: BRCM) saw the most significant rise in short interest between the May 31 and June 14 settlement dates.

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

Short sellers retreated from Advanced Micro Devices (NYSE: AMD), KLA-Tencor (NASDAQ: KLAC), Nvidia (NASDAQ: NVDA), Qualcomm (NASDAQ: QCOM), STMicroelectronics (NYSE: STM) and Texas Instruments (NASDAQ: TXN) during that time.

Here we take a closer look at how Applied Materials, ARM Holdings and Broadcom have fared and what analysts expect from them.

Applied Materials

This equipment and services provider to the semiconductor industry saw short interest rise more than 22 percent in early June to around 16.95 million shares. That essentially took back a 24 percent drop in the previous period. The number of shares sold short was more than one percent of the float in mid-June.

Applied Materials' president sold more than 256,000 of the company's shares in early June. The company has a market capitalization of more than $18 billion and a dividend yield near 2.7 percent. The long-term earnings per share (EPS) growth forecast of this S&P 500 component is about nine percent, and the return on equity is in the red.

Nine of the 19 analysts who follow the stock and were surveyed by Thomson/First Call recommend buying shares, three of them rating the stock at Strong Buy. But note that the mean price target, or where the analysts expect the share price to go, is only about four percent higher than the current share price.

The share price is about 29 percent higher than at the beginning of the year, and it reached a new multiyear high last week. The stock has outperformed the Nasdaq and competitor KLA-Tencor over the past six months.

ARM Holdings

The number of shares sold short in this multinational semiconductor and software design company jumped more than 38 percent to about 4.40 million, the highest level of short interest since February. The short interest was about one percent of the float, and days to cover was less than two.

This microprocessor designer has a market cap of about $17 billion and a dividend yield of about 0.6 percent. Rival Intel got a lot of buzz during the period for its progress in the mobile arena. ARM Holdings' return on equity is about 24 percent, and the long-term earnings per share (EPS) growth forecast is more than 22 percent.

Half of the 12 analysts polled recommend buying ARM Holdings shares, while none recommend selling. The analysts' mean price target suggests more than 23 percent upside potential. But note that the mean target is less than the multiyear high reached back in May.

The share price has pulled back more than 19 percent in the past month and is down about seven percent year-to-date. However, in the past six months, the stock has outperformed Applied Materials, Intel and Nvidia, as well as the broader markets.


Short interest in this Irvine, California-based company swelled more than 145 percent to 19.66 million shares in the first weeks of June. That is by far the largest number of shares sold short in at least a year, and it represents almost four percent of the float. The days to cover rose to more than two.

In June, Broadcom released a new high-performance processor for Android and other products. Broadcom has a market capitalization of more than $19 billion and a dividend yield near 1.3 percent. The long-term EPS growth forecast of this S&P 500 component is around 15 percent, and the price-to-earnings ratio (P/E) ratio is less than the industry average.

Of the 50 analysts surveyed, 15 rate the stock at Strong Buy and another 26 also recommend buying shares. They believe the shares have some room to run, as their mean price target is more than 16 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 retreated more than six percent in the past month, and it is more than two percent lower year-to-date. Over the past six months, the stock has underperformed Texas Instruments and the Nasdaq, but it has outperformed Qualcomm.

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