Apple short interest skyrockets; foul-ups and negative headlines could add to it

10 years ago

“Apple’s iPhone 6 and iPhone 6 Plus became available for sale September 19th. The new, larger iPhones have been flying off the shelves. In fact, over 10M iPhone 6s were sold the opening weekend, smashing previous sales records, and reviews have been mostly positive,” R.S. Analytics writes for Seeking Alpha. “It sure doesn’t sound like a good time to be short Apple, but apparently it is – the latest short interest report shows short interest increased over 30% from 96M shares on 8/29 to over 138M shares on 9/15. The short sellers were likely playing the extended ramp in Apple’s share price, rising from $75 in April to over $103 at the end of August, and figured there would be a sell-off post launch.”

“Toss in the “naked picture” security flap on 9/2 and a toppy market, and the short trade was making more sense,” R.S. Analytics writes. “Below are 3 recent incidents that have created “headline risk” that make the Apple short strategy look even more compelling and could cause the short interest to grow even higher in the coming reporting periods.””

• Bending iPhones: There has been no response from Apple as of yet. The Apple short trade just got a little more interesting.
• iOS 8 Software Fail: The iOS [8.0.1] update problem, in addition to “bendgate”, caused more negative headlines and gives the short interest less incentive to cover.
• The iTunes/U2 Promotional Misfire: Just another headline tarnishing the iPhone 6 launch.

“Obviously, none of the 3 above mentioned incidents are any kind of mortal blow to Apple, but they do serve to create ‘headline risk’ that will likely cause additional increases in the already elevated short interest,” R.S. Analytics writes. ” They also cost money and customer goodwill. When people pay a premium price for an iPhone, they expect premium hardware, premium software, and premium service. It makes sense right now to either short Apple stock or take profits while the stock is near all-time highs, the market is near all-time highs, and the short interest is piling in seemingly without fear.”

Read more in the full article here.