Apple's Short Interest Plummets

Consumer Electronics

Published: December 26, 2014 7:55 am

Maybe the market has reacted so sharply to the rise in Apple Inc.’s (NASDAQ: AAPL) stock that short sellers of the shares have abandoned them in droves. The drop in short interest was more than that of any other company traded on Nasdaq in the most recently reported period

Shares sold short in Apple dropped by 24.5 million to 53.7 million, a plunge of 31%. The drop in total shares was just ahead of Intel’s (NASDAQ: INTC), which fell 23.6 million.

The trigger for the fall-off in the Apple short interest is likely two reasons. The first is the robust increase in its share price over the past three months. The stock has risen over 14% during that period. The second reason short sellers were likely exited was that, not only did Apple post strong earnings in the last quarter, but analysts expect demand will push iPhone sales to a record as consumers rush to buy the new iPhone 6 and iPhone 6 Plus. Sales could surge above 60 million. iPhone sales represent more than 50% of Apple’s total revenue.

According to a Barron’s story on December 19:

Morgan Stanley’s Katy Huberty today reiterated an Overweight rating on shares of Apple, and a $126 price target, after concluding that demand for the recently refreshed iPhone line is tracking higher than she’d expected, amidst an overall expansion of the smartphone market globally.

Huberty’s “tracker,” a method that relies on looking at Google’s “Google Trends” to see what’s being searched, is indicating there is 67 million units worth of demand for the iPhone for the current quarter ending this month, above a 62-million unit estimate she’d been modeling previously, and what she thinks is perhaps 63 million in consensus numbers.

When Apple reported its fiscal fourth-quarter sales, management said iPhone sales were 39.7 million, which pushed revenue for the smartphone to $23.7 billion of Apple’s $42.1 billion for the quarter.

With analysts forecast for Apple shares to move over $125 or higher, against the current price of $112, there is every reason for shorts to get out.

Short interest in Nasdaq shares was as of December 15.

ALSO READ: The 5 Most Shorted Nasdaq Stocks in Mid-December

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