Short Interest in Apple Falls Over 7 Million Shares

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Ahead of earnings, and the release of the iPhone 8, the short interest in Apple Inc. (NASDAQ: AAPL) fell 7.7 million shares to 55.5 million for the period that ended June 15. Apple’s shares are down over 5% in the past month to $146.

Skeptics of Apple’s future generally make one or more of three arguments. These include a tepid reaction to the iPhone 8, a general perception that the world’s largest tech companies are overvalued as a group and that Apple has gotten into businesses it may not be able to dominate.

The iPhone 8 presumably will launch in September, although there a rumors the date could be pushed toward the end of the year. A late release could trigger a sell-off in Apple shares. It would open the door to speculation that Apple has trouble in its supply chain, or that the early versions of the iPhone 8 have technical flaws that must be repaired before release. The iPhone 8 also is expected to be a major leap ahead from the iPhone 7 family. Any major disappointment about new features and functions could cripple sales over the crucial holiday sales season.

Several of the largest tech stocks have sold off recently. These include Facebook Inc. (NASDAQ: FB), Alphabet Inc. (NASDAQ: GOOGL), Amazon.com Inc. (NASDAQ: AMZN) and Microsoft Corp. (NASDAQ: MSFT). Among all of them, Apple has dipped the most and posted the smallest recovery. Wall Street has become wary that, although each dominates its tech arena, shares have risen far too quickly and without adequate earnings support. In the past year, for example, Apple’s shares are up 59%.

Apple has entered several areas of tech that put it into competition with some of these larger tech companies. Its self-driving car initiative is well short of the work done by Alphabet’s Waymo. Its video on demand service lags well behind Amazon’s. Apple’s iPad tablet has had greater competition recently, particularly from Microsoft.

For short sellers who have built large Apple positions, only one thing of substance has to go wrong at the company. And the list of what could go wrong is substantial.