STMicroelectronics NV (STM:FP)
12-month performance: +97%
Short sell activity: Buoyant
Short sell pattern: Managers shorted stocks within a time frame of one week
Recent News: Poor Q2 results
Formed in 1987 due to the merger of SGS Microelettronica and Thomson Semiconductors, STMicroelectronics is Europe’s largest semiconductor manufacturer and developer. On the basis of revenue, the company is the leading semiconductor chip maker in Europe. It serves the regional markets of North America, Europe and Asia Pacific region with its products used in telecommunication, IT and industrial sectors. The company is listed on Euronext Paris and has a market capitalisation of approximately $26 billion.
Europe’s largest semiconductor and chip manufacturer exhibited strong performance in 2019, as its stock price climbed over 97% to a year end price of €23.97. However, the current year proved to be an uncertain and difficult year for the company due to Covid-19 market crash. It's share price plunged to €13.94 in mid March from a multiyear high of €29.37, wiping over $1 billion off its market value. The stock is now trading at around €24.86, recouping significant losses.
As per the latest Q2 Earnings report, net revenue decreased by 6.50% as compared to the previous quarter and witnessed a decline of 4% on a year on year basis. The company’s net income experienced a steep decline of 53% from the previous quarter and 43% from the same period last year. The gross margin of 35% has decreased 320 basis points as compared to the same quarter last year, mainly due to coronavirus workforce related restrictions and low automotive sales.
Source: 2iQ Research
Recent decline in revenue announced in Q2 results attracted shrewd short sellers in STMicroelectronics NV. As per 2iQ's Short data, a total of 3 investment managers shorted 16.67 million shares or 1.83% of total share outstanding according to the latest disclosure filed on 31st July 2020. Given the huge market capitalization of over $26 billion, the value of shorted shares approximately stands at $483 million based on yesterday’s close price.
Source: 2iQ Research *as of 12th August 2020
Interestingly enough, all three managers shorted the stocks within a space of one week between 24th to 31st of July. SCULPTOR CAPITAL MANAGEMENT EUROPE LIMITED a leading global alternative asset manager - being the largest short seller, shorted 7.2 million shares or 0.80% of shares outstanding on the 31st July 2020, estimated to be $211 million on Tuesday's closing price. BNP Paribas SA, another European giant increased its short position to 0.53% of shares outstanding from its last known position of 0.16% on 14 August 2017. Following, the noticeable short sell by investment managers and recent insider activity we believe caution is warranted towards STM stock right now.