AXTI: Short Sellers Retreat as Stock Gives Back Gains

AXTI enters the week of September 15 with a striking contradiction at its core: short sellers are abandoning positions at the fastest pace in months, yet the stock has shed 17% in a week and nearly 30% over the past month.

The short-covering story is the most telling data point right now. Short interest has collapsed 26.5% over the past five trading sessions, falling from roughly 12 million to 8.1 million shares — now 18.1% of the free float, down from a 30-day peak closer to 29%. Over the past month, short positions have been cut by 38%. That is a rapid and decisive unwind. Yet it has not translated into price support. The stock closed at $57.70 on September 15, down from levels above $110 in mid-June. The borrow market tells a similarly relaxed story: the cost to borrow has eased to just 0.38%, down 11% on the week and 24% over the month, while availability is ample at 213% — more than two shares available to borrow for every one currently lent out. There is no squeeze dynamic here. Shorts are leaving because they want to, not because they are being forced out.

Options positioning adds a mild defensive tint without flashing any alarm. The put/call ratio ticked up to 0.68 on September 15, just above its 20-day average of 0.67, with a z-score below one — well within normal range and far from the 52-week high of 1.20. Options traders are not positioning aggressively in either direction. The ORTEX short score of 59.1 — roughly in the middle of its recent range between 55 and 62 — reflects the same ambivalence: elevated but not extreme.

The Street view is split in a way that mirrors the price action. Needham upgraded AXTI to Buy in late July, setting a $90 target, right after the stock printed a remarkable 63% single-day gain on Q2 earnings. B. Riley, however, held its Neutral stance and raised its target only to $55 — almost exactly where the stock is now trading — having slashed it from $73 to $52 just three days before the earnings pop. The mean analyst price target of $91.60 implies substantial upside from current levels, though that figure is anchored to the July 31 post-earnings consensus and has not been updated since. Valuation has compressed sharply: the P/E multiple has fallen 16.7 points over the past 30 days, landing near 31x. EV/EBITDA has similarly retreated by 4.2 turns to 28.7x. The factor scores are a vivid split — EPS momentum over 90 days ranks at the 100th percentile, and EPS surprise sits at the 87th, but the short score rank of 9 and EV/EBIT rank of 1 point to a stock that remains expensive and still carries material short interest pressure.

The institutional picture has shifted fast. BlackRock filed a Schedule 13G in late July disclosing a 7.1% stake, and its reported holdings as of August 31 show a massive sequential addition of nearly 4 million shares. Jane Street also filed a 13G/A in August, nudging its disclosed stake to 6.7% from 5.1%. These are passive and quasi-passive holders, not activists — no 13D filings are on the register, and the disclosure note applies: these stakes are as-last-disclosed around the 5% threshold, and positions can change without a further filing. On the insider side, the net flow over the past 90 days was approximately -$29.8 million, driven by director sales at prices ranging from $87 to $115 — well above where the stock now trades.

The earnings history provides the sharpest context of all. The last print, on July 30, produced a 63% single-day gain and a 103% five-day move — a seismic reaction for a semiconductor materials name that reflects how deeply shorted and sentiment-driven AXTI had become. The next earnings event is scheduled for October 29. Between now and then, the question is whether the post-earnings selling by both insiders and short-covering traders reaches an equilibrium — or whether the 30% drawdown since June attracts fresh buyers encouraged by the momentum in the underlying indium phosphide business that drove that extraordinary July result.