One of the standouts of today's morning trading session was Analog Devices, which logged a 2.3% performance and outperformed the S&P 500 by 2.0%. The Semiconductors stock is now trading at $197.79 per share and may still have upside potential because it is still -6.39% under its average target price of $211.3. Analysts have set target prices ranging from $185.0 to $230.0 dollars per share, and have given the stock an average rating of buy.
The market seems to share this rosy outlook, since Analog Devices has a short interest of only 1.5%. This represents the percentage of the share float that is being shorted, and each short position stands for an investor's expectation that the price of the stock will go down in the future.
Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.
Another way to gauge the sentiment on Analog Devices is to look at the percentage of institutions that are invested in the stock. In this case, 92.0% of the shares are held by pension, mutual, and hedge funds, which shows that these institutions probably have strong confidence in the stock.
If institutions are invested in a particular stock, it shows in most cases that they have performed quality research and concluded that it is a good investment. In some cases, however, increases in institutional ownership could be a sign of a takeover attempt or proxy fight, which can actually injure share prices. Also, institutions are not infallible, and can certainly make miscalculations -- often with spectacular results.
In conclusion, we see mixed market sentiment regarding Analog Devices because of an analyst consensus of some upside potential, a buy rating, a very low short interest, and a significant number of institutional investors. At Market Inference, we believe that any investment decision should be preceded by an in-depth analysis of the company's fundamental values and a comparison with similar stocks.
Here's a snapshot of some important facts to keep in mind about ADI:
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The stock has trailing 12 month earnings per share (EPS) of $5.6
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Analog Devices has a trailing 12 month Price to Earnings (P/E) ratio of 35.3 compared to the S&P 500 average of 15.97
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The company has a Price to Book (P/B) ratio of 2.76 in contrast to the S&P 500's average ratio of 2.95
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Analog Devices is a Technology company, and the sector average P/E and P/B ratios are 35.0 and 7.92 respectively
