Technology

Microsoft Short Interest Drops 27% to 44 Million Shares

The turmoil in the attack on short sellers appears to have run its course and markets have returned to more or less normal, with the volatility index now back to its level prior to the attack. The VIX index reached a high of more than 36 on January 29 and the latest data on short interest was reported late Tuesday as of the January 29 settlement date.

As of January 29, more than 44 million shares of Microsoft Corp. (NASDAQ: MSFT) were sold short, which is about 0.6% of the company’s total float and an increase of 6% from two weeks earlier. A year ago, more than 56 million shares of Microsoft were short.

Note that short sellers also bought into FAANG stocks Facebook and Amazon in the most recent period.

The increase in short interest in Microsoft stock during the latter half of January likely reflects some analysts’ adjusting their price targets higher. The company’s stock continues to have an overall Buy rating and retains plenty of headroom between its most recent closing price of $243.77 and the consensus price target of $272.95. That gap implies a potential gain in the share price of 12% over the next year.

Looking at the high price target of $315, it implies a share price gain of nearly 30% over the next 12 months.

During the two-week short interest reporting period, Microsoft stock added just over 9% to its value, and as of Tuesday’s close, shares had added another 5% since January 29.

Shares added about 0.5% on Tuesday and traded up about the same amount in Wednesday’s premarket. The stock’s 52-week trading range is $132.52 to $245.09, and the high was posted last week. The consensus price target on the stock rose by more than $3 during the two-week period.  Given the potential share price gains based on the stock’s current price, Microsoft stock is not a particularly attractive play for short sellers.