Technology

Short Sellers Have Had Enough of Betting Against Apple, Microsoft

Paul Ausick

Published: May 12, 2021 9:34 am

The last short interest report was released just ahead of quarterly earnings reports from Apple Inc. (NASDAQ: AAPL) and Microsoft Corp. (NASDAQ: MSFT). Both tech giants got a small share price bump from their earnings reports, but over the course of the two-week short interest reporting period that ended April 30, both companies saw share prices slip and short interest plunge.

Short sellers had made big bets that both companies were going to disappoint investors and that their share prices would fall once the numbers were released. In the prior two-week period that ended April 15, both companies’ stocks rose by around 10%.

Short sellers dumped more than 45 million shares of Apple stock in the two weeks between April 15 and April 30, a plunge of 35% in short interest. Some 82.7 million shares were shorted by the end of April, or about 0.5% of the stock’s total float. Apple’s share price declined by 2.3% during the two-week period.

Short interest in Microsoft plummeted by 24% in the reporting period. About 46.7 million shares were short on April 30, representing 0.63% of Microsoft’s total float. Its share price decreased by 2.8% during the period.

As of Tuesday night’s closing bell, Microsoft stock had dropped more than 5% from its share price since March 31. Apple has dropped more than 6% from its share price during the same period.

Since Microsoft reported earnings on April 27, 17 brokerages have either initiated coverage on Microsoft or raised their 12-month price targets on the stock. All but one rate the stock the equivalent of Buy, and the median price target of 37 brokerages is nearly $298 a share. Microsoft stock closed Tuesday at $246.23, implying an upside potential of around 21% based on the median target. At the high target of $340 (from Goldman Sachs), the upside potential is about 38%.

Fifteen brokerage firms have weighed in on Apple since the company reported earnings on April 28. One, Goldman Sachs, raised its rating on the stock from Sell to Neutral and boosted its price target from the group’s low of $83 to $130. The median price target on the stock is $160 from 41 brokerages. At a closing price of almost $126 on Tuesday, the potential upside based on the median target is about 27%. At the high price target of $185, upside potential on the stock is nearly 47%.

To put these numbers into some context, short interest in both Apple and Microsoft is less than 1% of each stock’s total float, 16.67 billion shares in Apple’s case and 7.42 billion for Microsoft. The company with the largest percentage of its float sold short is GameStop Corp. (NYSE: GME), with nearly 11.82 million of its floated 47.75 million shares. The value of Apple’s short shares is about $10.4 billion and the value of Microsoft’s is about $11.5 billion. The value of the 11.8 million shorted GameStop shares is around $1.74 billion. GameStop’s current market cap of $10.4 billion is equal to the value of short interest in Apple and less than the value of short interest in Microsoft.