Why Shares of NXP Semiconductors NV Shorted Out

This article originally appeared as part of ongoing coverage in our premium Motley Fool Rule Breakers service ... we hope you enjoy this complimentary peek!

What's happening
Shares of NXP Semiconductors were among the hardest-hit in a broad semiconductor stock sell-off today after Microchip Technology executives warned of a looming correction for the sector.

Why it's happening
NXP is one of more than a dozen major chipmakers to be hit hard by Microchip's announcement, although its stock has been one of the hardest-hit in a field that includes several other Motley Fool favorites:

MCHP Price Chart

MCHP Price data by YCharts.

Microchip has developed a reputation as something of a canary in the silicon mine, and its executives certainly played to that reputation in a preliminary earnings report released after Thursday's closing bell. Microchip CEO Steve Sanghi warned that the company "often sees the turn of the industry ahead of others ... [because] we report sales from distribution on a sell-through basis worldwide. ... We believe that another industry correction has begun and that this correction will be seen more broadly across the industry in the near future."

In response to the warning, analysts at FBR Capital took a more defensive stance in the semiconductor space, but nonetheless reiterated their buy rating on NXP's shares. Hedgeye was the only notable analyst firm to warn on NXP specifically following Microchip's report, cautioning that it is among those "downside risk stocks" that could suffer from the high beta that previously made it a strong outperformer. NXP itself has yet to release a statement on this development.

Apple Watch revealed: The real winner is inside
Apple recently revealed the product of its secret-development "dream team" -- Apple Watch. The secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see where the real money is to be made, just click here!

The article Why Shares of NXP Semiconductors NV Shorted Out originally appeared on Fool.com.

Alex Planes owns shares of Intel. The Motley Fool recommends Intel, Apple, and NXP Semiconductors. The Motley Fool owns shares of Intel, Apple, and Skyworks Solutions. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story