Cypress Semiconductor Stock Downgraded on Near-Term NOR Risk

The analyst expressed concerns over the chip company's margins

Managing Editor
Sep 25, 2018 at 10:00 AM
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Cypress Semiconductor Corporation (NASDAQ:CY) stock is 6.1% lower to trade at $14.57 this morning, after KeyBanc downgraded the chip name to "sector weight" from "overweight." The analyst in coverage sees near-term risk with the company's gross margin targets, attributable to a drop in NOR pricing and a slowdown in the global automotive market. Longer term, though, they waxed optimistic on the company's auto and industrial businesses, as well as its internet of things (IoT) integration. 

While most chip stocks struggled last week, CY turned in a 2.5% weekly win. Those gains have now been erased, with the equity tumbling 2.8% yesterday thanks to a price-target cut to $13 from Morgan Stanley. Plus, today's drop takes the stock back below its year-to-date breakeven level. It's been a choppy year for CY shares overall, with their 30-day moving average emerging as resistance in the last month. 

Analysts for the most part remain upbeat on the semiconductor name. Of the 14 brokerages covering CY, nine rate it a "strong buy," with only one "strong sell" on the books. Further, the security's consensus 12-month price target of $20.35 is a 40% premium to current trading levels. 

Options traders, meanwhile, are growing increasingly skeptical. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), CY's 10-day put/call volume ratio of 0.34 ranks in the 88th percentile of its annual range. While this shows call buying has topped put buying on an absolute basis, the reading's high percentile ranking indicates the rate of put buying relative to call buying is quite unusual.

Echoing this, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.61 ranks in the 99th percentile of its annual range. This shows that short-term traders have rarely been more put-heavy toward the security in the past year.


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