EZchip Semiconductor Ltd, Advance Auto Parts, Inc. Hit Highs on Big News

EZchip Semiconductor Ltd (NASDAQ:EZCH) and Advance Auto Parts, Inc. (NYSE:AAP) are red hot today

by Alex Eppstein

Published on Sep 30, 2015 at 11:25 AM
Updated on Jun 24, 2020 at 10:16 AM

Monday was an active day on the corporate transactions front, but things have gotten interesting this morning, too. Specifically, EZchip Semiconductor Ltd (NASDAQ:EZCH) announced it has agreed to a buyout agreement with Mellanox Technologies, Ltd. (NASDAQ:MLNX), while Starboard Value LP disclosed a 3.7% stake in Advance Auto Parts, Inc. (NYSE:AAP). Below, we'll take a closer look at the headlines, as well as their impact on charts.

Trading on EZCH was halted pre-market on reports of a buyout. The Israel-based firm has since confirmed it is being acquired in a deal worth $811 million, or $25.50 per share. At last check, the stock has soared 14.5% to $25.18, after earlier touching an annual high of $25.21. Benchmark responded to the news by cutting its rating to "hold" from "buy," but upping its price target to $25.50 from $25.

Meanwhile, MLNX was last seen off 5.6% at $37.58, taking its year-to-date deficit beyond 12%. This ought to cheer short sellers and option bears alike. Nearly 7% of the stock's float is sold short, and its 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 2.70 ranks near the top quartile of its annual range. If that's not enough, Mellanox Technologies, Ltd.'s Schaeffer's put/call open interest ratio (SOIR) of 1.20 rests just 4 percentage points from an annual peak.

Separately, AAP is fresh off an all-time high of $192.50 on Starboard's newly announced stake, as well as the investment firm's bullish remarks. Specifically, a letter to AAP's CEO said the stock could be worth more than $400 per share by "implementing a comprehensive margin improvement program." At last check, the equity has spiked 11.7% to trade at $190.52 -- up nearly 20% year-to-date.

Short sellers could be feeling the heat. While short interest on Advance Auto Parts, Inc. dropped almost 16% over the last two reporting periods, it still represents 5.6% of the stock's float. At typical daily trading levels, it would take over one week to buy back all these bearish bets.

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