Before the market opened this morning, Xilinx, Inc. (XLNX - 31.01) lowered its fiscal third-quarter sales forecast, blaming a significant drop in customer business in the communications end market. XLNX now expects sales to be down 9% to 12% from the previous quarter. This quarterly sales revision comes just a week after Intel (INTC) took similar action, and could be a sign of ongoing weakness in the semiconductor sector.
Before today's downbeat news, the majority of analysts doled out a "buy" or better rating for the stock. Zacks tallies 11 "strong buys" and one "buy" endorsement, compared to 10 lukewarm "holds" and zero "sell" suggestions.
However, not everyone on Wall Street is a fan of XLNX. Despite depleting by roughly 23% over the past month, short interest still accounts for 6.3% of the security's float. These bearish bets would take nearly one week to unwind, at XLNX's average pace of trading.
Option players seem to be bearish toward XLNX, as well. During the past 10 sessions, speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 4.08 puts for every call. This ratio arrives in the 86th percentile of its annual range, signaling that traders on these exchanges have purchased puts over calls at a faster clip than usual during the past couple of weeks.
Plus, the security's Schaeffer's put/call open interest ratio (SOIR) of 2.46 indicates that puts more than double calls among options slated to expire within three months. This ratio ranks in the 93rd percentile of its annual range -- just seven percentage points from a pessimistic peak -- indicating that near-term option traders have rarely been more bearishly aligned toward XLNX.
XLNX is fractionally lower so far today, cutting into its modest 7.7% gain in 2011. The shares are currently staring up at the $32-$34 area, which has contained all of the stock's weekly closes since the end of July, and could continue this role as resistance in the near term.
With familiar resistance looming overhead, and plenty of bullish sentiment still lingering among brokerage firms, a fresh bout of downgrades could drag XLNX lower.
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