Tag Archives: MU

Short Sellers Grow More Selective on Semiconductor Stocks

Semiconductor trends are considered to be leading indicators of technology and broader electronics demand. In a wider sense, semiconductor and tech stocks are considered to be leading indicators for the markets in general. A strong rally in the tech sector pushed many of these companies to new highs, but with the return of volatility semiconductors will have to rally again if markets want to return to record levels.

The April 30 short interest data have been compared with the previous report. Short interest moves in these selected semiconductor stocks were mixed.

Intel Corp. (NASDAQ: INTC) saw its short interest decrease to 76.32 million shares. The previous level was 86.26 million. Note that, like AMD, Intel is one of the most shorted Nasdaq stocks. Intel shares were last seen trading at $54.25, in a 52-week range of $33.23 to $55.79.

The number of Advanced Micro Devices Inc. (NASDAQ: AMD) shares short decreased to 179.44 million from the previous level of 192.62 million. Shares recently traded at $12.05, in a 52-week range of $9.04 to $15.65.

Qualcomm Inc. (NASDAQ: QCOM) saw the number of its shares short fall to 16.89 million from the 20.03 million reported in the previous period. Shares were changing hands at $54.45, in a 52-week trading range of $48.56 to $69.28.

Short interest in Applied Materials Inc. (NASDAQ: AMAT) rose to 16.83 million shares. The previous reading was 14.46 million. Shares were trading at $54.70, in a 52-week range of $40.79 to $62.40.

Micron Technology Inc. (NASDAQ: MU) saw its short interest increase to 57.80 million shares from the previous reading of 53.50 million. Shares were trading at $51.85, in a 52-week range of $26.39 to $63.42.

And the short interest in Broadcom Ltd. (NASDAQ: AVGO) increased to 6.74million shares in the period from the previous 5.12 million. Shares were last seen at $240.25, in a 52-week range of $221.98 to $285.68.

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Why AMD Will Not Fall Below $11

As a company in a turnaround situation, Advanced Micro Devices (AMD) would traditionally get pulled lower as markets teeter with a downward bias. At the time of writing, the S&P 500 and the Dow Jones are trading lower by 0.5 1 percent daily. The volatility gives bears, who collectively raised their bearish bet against the stock, an excuse to find doubt in AMDs recovery. Unfortunately, the chip company reported too good a quarter and raised its guidance, lessening any doubt that the company will achieve higher sales and profits in 2018 and beyond.

Cryptocurrency a Non-Issue

AMD is well aware that its loyal fans of PC gamers will give Vega a chance over Nvidias (NVDA) GTX graphics cards. The cryptocurrency miners, specifically for Ethereum but tracked through the ETF (OTCQX:GBTC), are more than willing to pay twice or three times over MSRP for Vega GPUs. Since AMD does not benefit from the higher prices, and crypto miners will slow GPU purchases as mining becomes less profitable, the company looks out for its community of enthusiasts. On the conference call, AMD said:

Our first priority when we look at (the) allocation of graphics cards is to gamers. And so that’s through OEMs, that’s through system integrators, that’s also working with key e-tailers to make sure that they are prioritizing the gamers segment and we’re going to continue to do that. And so, that’s one piece that we know well. We also work directly with the commercial miners, and so, we see kind of what their forecasts are and they work with us and so that we have good visibility on.

Source: SA Transcript

AMD Vega
Crypto miners account for only 10 percent of GPU revenue. While they have disrupted pricing for GPUs, memory, and other PC parts, AMD will continue supporting their needs. Its just that it will put a higher priority to the gamer market. Last month, prices of GPUs started falling by around 25 percent. ASICs designed to mine Ethereum put a negative pressure on GPU prices. So as mining using Vega cards fall, the market could get a potential flood of AMD and Nvidia GPUs. Since the resale value of such cards is lower and the demand less desirable, it should not compete with sales of AMDs GPUs at the retail stores.

Ryzen Momentum Accelerating

ASPs for CPUs rose during the quarter and will go up again throughout the year. Ryzen accounted for 60 percent of client processor revenue, up around 20 percent sequentially. More desktop and notebooks are getting Ryzen chips, giving ASPs a lift. The launch of second-generation Ryzen desktops, based on the 12 nanometer Zen+ architecture, should not only keep ASPs from falling but may even give a boost. With more retailers like Dell and HP Inc. (HPQ) offering Ryzen-powered computers, AMD may need to raise its revenue forecast later this year.

In the current second quarter, Ryzen mobile launch will not add to results in the near term but will give profit margin a lift later this year. Already, Dell has 2-in-1 notebooks, while Acer, HP, and Lenovo all experienced strong sales last quarter. Investors may confidently forecast higher mobile revenue and profits in Q3 and Q4 this year, above managements forecast.

AMD is not stopping at Zen+. It is building on the 7 nm capability, in-line with the product roadmap for Ryzen:

I think as we look forward, and I think this is important, we believe that the 7-nanometer capability of the foundry ecosystem is very good, and that puts us in a good competitive spot from a manufacturing standpoint. And then, on the design side, obviously, we have things that we’re planning. And so, I see the competitive environment as one that is as good and we’re going to work very hard to make sure that it gets better over time. Obviously, we take the competition very seriously.

Source: SA Transcript

Conversely, Intel is delaying its 10 nm Cannon Lake because it can. To compete effectively against AMD’s Ryzen, Intel need only cut prices for its chips.

Deep-Learning Platform

Just as Nvidia (NVDA) stock trades at P/Es in the 40 50 range thanks to its deep-learning and super-computing offering, especially in the ADAS (self-driving) market, the same may happen for AMD stock. Still, investors must have patience before AMD trades at Nvidia-like multiples. Radeon Instinct 125 is getting validated and tested at this time. AMD just launched ROCm, or Radeon Open Compute ecosystem, a platform for GPU-Enabled HPC and Ultrascale Computing.

Speaking of supercomputers, AMD announced a deal with Cray (CRAY) whereby Crays supercomputers will use EPYC chips.

ROCm is in the early innings and is something that offers power-hungry users an alternative to Nvidias offerings.

Semi-Custom Sales Fall

Investors should not be surprised that revenue from the embedded and semi-custom segment dropped in the first quarter. AMD did not collect any big royalty payments in the period. The console refresh cycle has yet to restart. Until Sony (SNE) and Microsoft (MSFT) ask for more powerful APUs, the Jaguar architecture is good enough for current-generation consoles.

Valuation and Takeaway

At $11 a share, AMD may trade above its peers from an EBITDA multiples comparison. The forward growth is under-stated in light of the pace of Ryzen and Vega sales the company demonstrated in its first quarter. Sure, Micron (NASDAQ:MU) and Lam Research (NASDAQ:LRCX) are valued at lower forward P/Es, but if its growth is slowing and AMD’s is accelerating, the disparity in the valuation is justified.

Source: finbox.io

And while Wall Street has an average price target of $13.84 on AMD stock, conservative investors may choose Qualcomm (QCOM), Micron Technology, Nvidia, and Intel (NASDAQ:INTC) as better comparisons. In that scenario, AMDs relative premium is justified because of the 40 percent revenue growth in the last quarter. Even after assuming revenue growth slows to the single digits within the next 10 years, AMD stock has a fair value in the teens.

Please [+]Follow me for value stocks on sale. Click on the big “follow” button beside my my avatar.

DIYers (Do-it Yourselfers) benefited from the AMD trading strategy ahead of the earnings report. This DIY idea originates from the DIY Value Investing marketplace service.

Disclosure: I am/we are long AMD.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Fridays Vital Data: Intel Corporation (INTC), NXP Semiconductors N.V. (NXPI) and Alibaba Group Ho

U.S. stock futures are trading broadly lower this morning. Wall Street was clearly anxious ahead of this morning’s April jobs report. Expectations were for a gain of 188,000 last month, on the heels of March’s surprisingly low 108,000 job adds.

stock market today

Meanwhile, corporate earnings continue to chug along. Alibaba Group Holding Ltd (NYSE:BABA), Celgene Inc. (NASDAQ:CELG) and GoPro Inc. (NASDAQ:GPRO) are front and center on the earnings front.

Heading into the open, futures on the Dow Jones Industrial Average are down 0.33%, S&P 500 futures have shed 0.35% and Nasdaq-100 futures have lost 0.42%.

Turning to the options pits, volume rebounded to normal levels on Thursday. Overall, about 19.9 million calls 18.8 million puts crossed the tape. Despite the jump in call activity, the CBOE single-session equity put/call volume ratio surged to a one-month high of 0.75. The 10-day moving average also moved higher, hitting it’s own one-month high of 0.66.

Options traders were once again paying sharp attention to the semiconductor sector. News broke that “next generation” flaws were again found in Intel Corporation (NASDAQ:INTC) chips, driving heavy volume on INTC stock. Additionally, NXP Semiconductors N.V. (NASDAQ:NXPI) reported weaker-than-expected earnings, drawing attention to options arbitrage spreads in it’s Qualcomm Inc. (NASDAQ:QCOM) merger deal. Finally, Alibaba Group Holdings was call heavy heading into this morning’s quarterly earnings report.

Let’s take a closer look:

Friday’s Vital Options Data: Intel Corporation (INTC), NXP Semiconductors N.V. (NXPI) and Alibaba Group Holding Ltd (BABA)investorplace.com/wp-content/uploads/2018/05/05-04-2018-Top-Ten-Options-300×136.png 300w, investorplace.com/wp-content/uploads/2018/05/05-04-2018-Top-Ten-Options-200×90.png 200w, investorplace.com/wp-content/uploads/2018/05/05-04-2018-Top-Ten-Options-400×181.png 400w, investorplace.com/wp-content/uploads/2018/05/05-04-2018-Top-Ten-Options-116×52.png 116w, investorplace.com/wp-content/uploads/2018/05/05-04-2018-Top-Ten-Options-100×45.png 100w, investorplace.com/wp-content/uploads/2018/05/05-04-2018-Top-Ten-Options-111×50.png 111w,https://investorplace.com/wp-content/uploads/2018/05/05-04-2018-Top-Ten-Options-78×35.png 78w” sizes=”(max-width: 518px) 100vw, 518px” />

Intel Corporation (INTC)

Options traders loaded up on Intel calls yesterday. It was an interesting reaction to news that “next generation” flaws had been found in Intel semiconductors. Specifically, a German computing magazine reported yesterday that researchers found eight new flaws in INTC chips resembling the Meltdown and Spectre bugs revealed earlier this year.

Intel said it was aware of the flaws and was working to patch them. “We believe strongly in the value of coordinated disclosure and will share additional details on any potential issues as we finalize mitigations,” Intel said in a statement.

In a “been there, done that” kind of response, INTC options traders loaded up on call options following the news. Volume came in at 177,000 contracts, with calls gobbling up 83% of the day’s take.

Looking out to May options, the bulls appear to be in firm control of Intel’s short-term sentiment backdrop. Currently, the May put/call open interest ratio comes in at 0.45, with calls more than doubling puts for the series.

But this Intel optimism is not without merit. In fact, INTC stock continues to outperform most of its semiconductor peers, including red-hot names like Advanced Micro Devices, Inc. (NASDAQ:AMD) and Micron Technology Inc. (NASDAQ:MU).

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NXP Semiconductors N.V. (NXPI)

If you are arbitraging Qualcomm’s buyout of NXP Semiconductors, yesterday was painful for you. NXPI stock plunged more than 10% after the company missed Wall Street’s first-quarter earnings target by 12 cents per share. NXPI is now trading about 36% below Qualcomm’s buyout offer of $127.50 per share.

The deal has been slowed by Chinese regulators, whom many argue are dragging their feet due to troubled China/U.S. trade relations.

NXPI options traders were somewhat bullish following the news. Volume rose to 190,000 contracts, nearly tripling NXPI’s daily average. Calls made up about 58% of the day’s take. But while short-term options are optimistic, August options are downright bearish.

Qualcomm and NXP expect a ruling from China by their new deal deadline of July 25. If the August put/call OI ratio of 1.80 is any indication, NXPI options traders believe the deal will fall apart.

Alibaba Group Holding Ltd (BABA)

Alibaba calls were quite popular ahead of this morning’s quarterly report. Volume rose to an impressive 406,000 contracts, with calls eating up 71% of the day’s take. As a result, the May put/call OI ratio fell to 0.67 as traders bet on a post-earnings rally.

Heading into the open, BABA stock is up 1.5% amid a weak start among the major market indexes.

By the numbers, Alibaba posted another blowout quarter. Earnings rose 32% year-over-year to 90 cents per share, topping expectations by 5 cents per share. Sales surged 61% to $9.73 billion, easily beating Wall Street’s view for $9.3 billion.

As of this writing, Joseph Hargett held no positions on any of the aforemen