Analyst: Sell These 2 Chip Stocks

Both stocks are sitting out the broad-market rally today

Managing Editor
Apr 5, 2018 at 10:13 AM
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Chip stocks Micron Technology, Inc. (NASDAQ:MU) and Texas Instruments Incorporated (NASDAQ:TXN) are both sitting out the broad-market rally after receiving bearish brokerage notes to start the day. Specifically, UBS initiated coverage on the two semiconductor stocks with "sell" ratings, as well as price targets of $35 and $85, respectively.

Majority of Analysts Still in MU's Corner

At last check, MU was down 3.9% to trade at $51.30, with UBS expecting an increase in DRAM supplies to hurt the company later in the year. Nevertheless, Micron stock has added an impressive 25% in 2018. After touching a 17-year high of $63.42 on March 13, MU shares pulled back, although the drop has been contained by the shares' 50-day moving average.

Despite the bearish analyst attention today, most brokerage firms remain optimistic. Of the 23 brokerages covering the equity, 20 rate it a "buy" or "strong buy." Furthermore, Micron's average 12-month price target stands up at $72.72

TXN Stock Tests Key Moving Average

Texas Instruments stock is down 1.4% to trade at $102.70 so far today. TXN shares scored a record high of $120.75 in late January, but have since then pulled back to their 160-day moving average, which provided support during the summer months of 2017.

Despite the stock's recent struggles, options traders have preferred calls over the past 10 weeks. Currently, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows TXN with a 50-day call/put volume ratio of 1.11, ranking in the elevated 80th percentile of its annual range. Those looking to bet on Texas Instruments using options must pay up, however, according to its 30-day at-the-money implied volatility of 32.1%, which ranks in the 97th annual percentile. 

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