Maxim Integrated: Smartphone Chip Stock Positioned for Upside

Includes: MXIM, SMH, XLK
by: Joe Kunkle

Maxim Integrated (NASDAQ:MXIM) saw a large institutional size trade yesterday at 1:10pm on the Phillix that was the exact same trade as one seen at 11:43am on the ISE. At 11:43am a trader bought 2,000 of the August $17.50 calls for $0.58 and sold 1,000 of the August $15 puts for $0.71. At 1:10pm a trader bought 3,000 of the August $17.50 calls and sold 1,500 of the August $15 puts.

These bullish ratio reversal spread trades are looking for a move higher in shares of the Broad Line Semiconductor. In late April MXIM reported better than expected earnings and guided for a strong Q4. Maxim has the ability to charge higher prices as it operates in the Analog space, and customizes designs, so it is less susceptible to pricing worries. Analog chips also have very high margins, and the mini energy efficient chips are being used in a variety of mobile devices.

Looking at the transcript from the June 10th UBS Conference presentation, MXIM CFO Bruce Kiddoo sounded bullish, saying the company is outperforming peers and Maxim products are in just about every smartphone out there. The company is also performing well in the notebook segment. The CFO also mentioned that there is a lot of room to use cash for share repurchases going forward.

Maxim shares have consolidated above its 200 day EMA and have held up well through the pullback, and it looks like time to get into a high growth and margin semiconductor.

Disclosure: Looking to Buy Calls in MXIM