Short Sellers Dump Apple, Buy Microsoft

Both Apple Inc. (NASDAQ: AAPL) and Microsoft Corp. (NASDAQ: MSFT) will report June quarter results later this month. Both companies posted double-digit share price gains over the course of the quarter, and the market caps of both companies remain solidly above $2 trillion.

For the year to date, Microsoft stock has added about 25.9%, compared to a share price gain of 9.5% for Apple. Since January of 2020, Apple stock is up nearly 89% to Microsoft’s 65.4%.

Short interest in Microsoft increased by 5.6% in the two-week reporting period that ended June 30. About 50.82 million shares were short, representing 0.69% of Microsoft’s total float. At the same time that short interest was rising, Microsoft’s share price increased by about 4.9%, making the stock even more attractive to short sellers.

In the same period, short interest in Apple stock fell by 17.22% to 90.21 million shares, representing about 0.54% of the company’s total float. Apple’s share price rose by about 5.65% in the period.

Of 38 analyst ratings on Microsoft, only two are at Hold, with the other 36 at Buy (26) or a Strong Buy (10). The median price target on the stock is $300, with a high target of $345. At a recent price of around $278.50, the implied upside at the median price target is 7.7%. At the high price target, the implied gain is nearly 24%.

Microsoft stock trades at around 36.0 times expected fiscal 2021 earnings per share, 33.7 times estimated 2022 earnings and 29.4 times estimated 2023 earnings.

The company is scheduled to report fiscal 2021 fourth-quarter results on July 22, and analysts are expecting revenue of $44.29 billion and adjusted earnings per share (EPS) $1.92. Those estimates reflect a 16.3% increase in revenue and 31.5% in EPS.

Shortly after Tuesday’s opening bell, Microsoft stock traded up less than 1%, at $278.45 in a 52-week range of $196.25 to $280.69.

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 and one Strong Sell rating. The median price target on the stock is $160, and the high target is $185. At a recent price of around $146.20, the upside potential at the median target is 9.4%, and the upside potential at the high target is 26.5%.

The stock trades at 28.3 times expected fiscal 2021 earnings per share, 27.6 times estimated 2022 earnings and 26.4 times estimated 2023 earnings.

Apple will report fiscal 2021 third-quarter results on July 29. Quarterly revenue is expected to come in at $73.12 billion, and EPS is forecast to reach $1.00. Compared with the year-ago quarter, EPS is forecast to rise by 53.8% and revenue is forecast to increase by 22.5%.

Apple shares traded up by about 1.1% Tuesday morning to $146.14, in a 52-week range of $89.14 to $146.32.