Kerrisdale Capital thinks Qualcomm's value could be cut in half
Qualcomm, Inc. (NASDAQ:QCOM) is trading down 2.7% at $52.81 following a short seller report out of Kerrisdale Capital, which suggested the stock could fall 50%. Kerrisdale called out the regulatory risks facing Qualcomm, particularly its licensing business, predicting the company will lose its legal battle against the Federal Trade Commission (FTC). This news has sparked unusual activity in QCOM's options pits.
As of lunchtime today, more than 41,000 put options have traded, already almost doubling the daily average, and blowing past call volume of 26,000 contracts. Much of this action has taken place in the weekly 1/25 series, where new positions are opening at the 51.50-, 52.50-, and 53-strike puts. Anyone buying these puts would be expecting more downside for QCOM through Friday's close, when the series expires.
This preference for puts runs against what's normally seen from those speculating on Qualcomm. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows call buying has almost tripled put buying in the past two weeks, and what's more, calls account for the top six open interest positions on the security.
Meanwhile, it's notable that short interest has actually been declining on QCOM, or at least it did in the last two reporting periods, falling 16%. At the same time, short interest still accounts for a healthy 5.2% of the float.
Some of these bears may have decided to cover because of the stock's sharp sell-off in recent months, falling from a high of $76.50 in September to current levels. Today's price action has the tech giant set for its lowest close since May, as it's at least momentarily given up its floor near the $54 level after a recent meet-up with the 50-day moving average.
