Apple Short Interest at 100 Million, but Earnings Drive Stock Higher

The short interest in Apple Inc. (NASDAQ: AAPL) reached 100 million shares for the period that ended January 15. That was up from 41 million on the same date a year ago, but down from 140 million in July. That short interest could collapse at the end of this month, as earnings drive Apple’s shares higher.

Short sellers may be at ease with Apple’s stock for the time being. It has performed the same as the market over the past 30 days. However, with the stock price at $137, the median price target analysts have on the stock is $153. Their highest target is $175, which is about 28% above the current level. Should the stock move that way quickly, many short positions could be overwhelmed. Short covering could drive Apple’s shares even higher.

There is reason to believe Apple’s shares will make a move, unless the entire market craters and takes most, if not all, major tech stocks down with it.

Apple’s major advantage against investors who believe its share will fall is its most recent quarterly results. Revenue rose from $91 billion in the year-ago period to $111 billion, a record. Earnings went from $1.25 a share to $1.68. Apple’s balance sheet includes among current assets $41 billion in marketable securities and $36 billion in cash. Apple’s market cap has topped $2.4 trillion.

Luca Maestri, Apple’s chief financial officer, commented: “Our December quarter business performance was fueled by double-digit growth in each product category, which drove all-time revenue records in each of our geographic segments and an all-time high for our installed base of active devices.”

The primary catalyst of another increase in Apple’s shares is the belief that iPhone 12 sales will continue to surge because of the global rollout of the new 5G superfast wireless standard, which is in its infancy in many markets. As it matures worldwide, the demand for the iPhone 12 will continue to rise.

Some 41 million Apple shares were held short just a year ago. With improving results, and a share price likely to rise in the next several months, the 100 million short interest probably will erode.