Technology

Short Sellers Sidestep Apple, Microsoft

On Thursday, Microsoft Corp. (NASDAQ: MSFT) closed the trading day with a market cap above $2 trillion. It is only the second U.S. company to reach that milestone. The other, of course, is Apple Inc. (NASDAQ: AAPL).

Coincidentally, Microsoft also introduced its coming Windows 11 operating system on Thursday. Among the many features the company promised in the new version of Windows was the ability to run Android apps directly. Microsoft did not announce a release date for Windows 11, but it is expected to be available this fall as a free upgrade for Windows 10 users.

CEO Satya Nadella took the occasion to take a couple of swipes at Apple and its restrictive App Store policies.

Year to date, Microsoft stock is up about 20% compared to a share price gain of just 1% for Apple. Since January 2020, Apple stock is up nearly 84% to Microsoft’s 72%.

Short interest in Microsoft increased by 4% in the two-week reporting period that ended June 15. About 48.14 million shares are short, representing 0.65% of Microsoft’s total float. At the same time that short interest has been rising, Microsoft’s share price increased by 3.5%, making the stock even more attractive to short sellers.

In the same period, short interest in Apple stock fell by 12% to 108.94 million shares, also representing about 0.65% of the company’s total float. Apple’s share price rose by 4% in the two-week period.

Of 38 analyst ratings on Microsoft, only two rate the shares a Hold with the other 36 rating the stock a Buy (26) or a Strong Buy (10). The median price target on the stock is $298 with a high target of $340. At a recent price of around $266, the implied upside at the median price target is 12% and at the high price target it is nearly 28%.

Microsoft stock trades at around 34x expected fiscal 2021 earnings per share, 31.9x estimated 2022 earnings, and 27.8x estimated 2023 earnings. The company is scheduled to report fiscal 2021 fourth-quarter results on July 22.

Just before 11 a.m. Friday, Microsoft stock traded down less than 1% to $265.79 in a 52-week range of $193.55 to $267.85.

Among the 42 analysts covering Apple, 24 rate the shares a Buy, eight rate the stock a Strong Buy, and eight rate the shares a Hold. There are two Sell ratings. The median price target on the stock is $160, and the high target is $185. At a recent price of around $134, the upside potential at the median target is 19% and at the high target it is 38%.

The stock trades at 26x expected fiscal 2021 earnings per share, 25.3x estimated 2022 earnings, and 24.4x estimated 2023 earnings. Apple will report fiscal 2021 third-quarter results on July 29.

Apple shares traded up less than 1% Friday morning at $133.65 in a 52-week range of $87.82 to $145.09.