| NEW YORK/BANGALORE
NEW YORK/BANGALORE Aug 28 Israel-based EZchip
Semiconductor's shares rose 10 percent on
Thursday and there was a spike in bullish options bets after the
chipmaker canceled expected appearances at upcoming brokerage
conferences, sparking talk of a possible deal for the company.
There is "no news but there has been recent speculation that
EZCH could likely be an acquisition candidate," Jay Srivatsa of
Chardan Capital Markets said.
EZchip's management canceled plans to attend two separate
industry events hosted by Roth Capital and Brean Capital
scheduled for Sept. 3, said Ehud Helft, investor relations
representative for EZchip. Helft said the company's management
would not be in town for those events but did not elaborate.
"If an M&A offer came up it would not surprise me that
management may take that offer, given the fact that the market
has been unwilling to recognize the value EZchip has created,"
said Feltl & Co analyst Jeffrey Schreiner, who has a strong buy
rating and a $31 price target on the shares.
Shares of the stock are down 3.7 percent in the last year,
compared with a 16 percent gain for the S&P Small Cap Index. Its
forward 12-month price-to-earnings ratio lags its peers at 16.4
versus the 18.7 average for its competitors.
EZchip provides high-speed network processors for the
ethernet switching and routing market and counts Cisco Systems
among as its largest customers.
The stock rallied sharply on Thursday, with shares up $2.47
at $27.78 on Nasdaq in afternoon trade with 1.24 million shares
traded, about 10 times the 50-day average volume of 122,000
shares. They touched a high of $28.50 earlier in the day.
Thursday's options volume of nearly 9,000 contracts is 20
times greater than normal, according to Fred Ruffy, options
strategist at Whatstrading.com, with calls outnumbering puts by
a 5.5-to-1 ratio.
A trader bought about 2,000 October $24 calls in EZchip at
10:35 a.m. EDT for $2.05, which coincided with the breakout in
the stock. Steve Place, founder of options analytics firm
investingwithoptions.com in Mobile, Alabama, said the trade was
most likely in response to whatever news was coming out.
"What's interesting is that the bid was at $1.75 and the ask
was $2.05, that's a 30 cent wide bid-ask spread and they bought
the ask. That's an incredibly aggressive trade," Place said.
(Reporting by Saqib Iqbal Ahmed and Soham Chatterjee; Editing
by Cynthia Osterman)