Microsoft Short Interest Down 25% Year Over Year

Short interest in Microsoft Corp. (NASDAQ: MSFT) increased by 3% in the two-week reporting period between February 12 and February 26. Microsoft’s total float is roughly 7.4 billion shares, and short interest as a percentage of the total float was just 0.56%, or 41.6 million shares. At the same point last year, more than 55 million shares were short.

Microsoft stock’s performance for the year to date diverged from that of Apple in late January, following Apple’s fiscal first-quarter earnings report. Microsoft shares continued to rise, eventually reaching a year-to-date gain of around 10%, before dropping back to a gain of around 2.2% late last week. Following Tuesday’s 2.8% share price gain, Microsoft stock is up nearly 5.4% for the year.

The modest increase in short interest in Microsoft follows a drop of 9% in the prior two-week reporting period. Analysts remain mostly upbeat on the stock, with 27 of 34 ratings at Buy or Strong Buy and just six at Hold. Goldman Sachs added Microsoft to its Conviction Buy list on Monday, noting: “We see a pathway for sustained double-digit topline growth alongside continued margin expansion, particularly as the Commercial Cloud business continues to grow as a percentage of the overall mix.”

The tech sector, as a whole, reached a year-to-date low on March 8 but recovered about 3.4% on Tuesday as investors probably had decided that it was time to buy the dip. From a peak of around 2,435 on the S&P 500 tech sector index, the index hit a trough of around 2,200 on Monday, before settling at near 2,282 on Tuesday.

Rising bond rates increased even more during the two-week short interest reporting period, gaining 20 basis points. They’ve added another 15 or so basis points since then to trade Wednesday morning at around 1.56%.

The consensus price target on Microsoft stock is $273.59, and shares closed Tuesday at $233.78, implying a potential upside of 17%. At the high price target of $315, the potential upside in the shares is 35%.

The stock’s 52-week range is $132.52 to $246.13, and the consensus price target on the stock rose by just a few pennies in the two-week period ending February 26, following a jump of $3 in the final two weeks of January. Given the potential share price gains based on the stock’s current price, Microsoft stock is not a particularly attractive play for short sellers. The company is keeping its head down and continuing to build its cloud and licensing businesses. The stock traded up fractionally early Wednesday to $235.66.