Many people like to follow what the “big money” institutional and hedge funds are buying, selling and shorting. So I began looking over some companies that have had changes in these areas. These companies are Yandex NV (NASDAQ:YNDX), Baidu.com, Inc. (ADR) (NASDAQ:BIDU), Zynga Inc (NASDAQ:ZNGA), Apple Inc. (NASDAQ:AAPL) and Netflix, Inc. (NASDAQ:NFLX).
If short interest increases, then shorts are betting that the price of the security will be going down. However, if short interest decreases, then shorts are betting that the price of the security is near its bottom and will likely be going back up.
Many investors use short interest to make predictions about the direction of a particular stock and to measure the bullishness or bearishness of it. Below is a table of the short interest increases of the following companies.
| Settlement Date | AAPL | BIDU | YNDX | NFLX | ZNGA |
| 4/30/13 | 41,589,490 | 13,225,924 | 1,759,980 | 10,371,036 | 33,435,127 |
| 4/15/13 | 20,074,811 | 12,043,984 | 1,746,603 | 8,185,777 | 26,649,539 |
| 3/28/13 | 20,006,081 | 12,765,426 | 1,634,772 | 7,492,552 | 27,657,366 |
| 3/15/13 | 20,497,889 | 12,063,954 | 3,824,028 | 8,468,258 | 28,211,393 |
| 2/28/13 | 19,432,642 | 11,585,087 | 2,265,991 | 8,419,640 | 26,137,139 |
*Data from Nasdaq.com
As you can see from the table above, short interest has been increasing in these stocks. So why are shorts increasing their positions? There could be many different reasons as to why, so a good question to ask yourself in this situation is what do the shorts know that you don’t. Let’s take a look at the companies to see what has transpired for the rise in short interest.
Zynga Inc (NASDAQ:ZNGA): Develops, markets, and operates online social games in the United States and internationally.
Zynga has a market cap currently of $2.65 billion. Zynga has over $1.7 billion in cash and marketable securities and has no debt. As of Apr. 30, Zynga had short interest of 33.4 million, representing an increase of close to six million shares from the end of March. The short float now stands around 4% with the days to cover ratio at 1.16 days. Analysts have an average price target of $3.88 on Zynga which would reflect an increase of 17% from its closing price of $3.34 on Tuesday.
Some of the reasons for the climb in short interest was the fact that Zynga had mixed earning results a couple of weeks ago. Even though they beat on both the top and bottom lines, because of the weak guidance they gave for the upcoming quarter, shares have fallen. From the earnings report investors can see that Zynga’s monthly players have fallen from 292 million to 253 million, while its number of monthly paying users decreased to 2.5 million from 3.5 million. Because of this, shorts have taken a bigger position in the social games maker. I wouldn’t be surprised to see short interest keep climbing until Zynga can show that its system works (profitably) and is turning the corner.
Apple Inc. (NASDAQ:AAPL): Apple along with its subsidiaries, designs, manufactures, and markets mobile communication and media devices (iPhones, iPad’s), personal computing products, and portable digital music players (iPod’s) worldwide.
Apple Inc. (NASDAQ:AAPL) has a market cap currently worth over $415 billion. As of Apr. 3o, Apple had short interest of 41.5 million, representing a massive increase of over 20 million shares since the end of March. The short float now stands around 4% with the days to cover ratio at 1.73 days. Analysts have an average price target of $542.66 on Apple Inc. (NASDAQ:AAPL), which would reflect an increase of around 23% from its closing price of $443.86 on Friday.
Apple Inc. (NASDAQ:AAPL) flipped the world upside down when it announced its quarterly earnings report a couple of weeks ago. While they beat on both the top and bottom lines for the second quarter, revenue guidance for the third quarter was a lot weaker than most expected. Short sellers had to of been happy that Apple’s margin’s continued to decline, coming in at the lower end of the range.
Many investors and analysts were looking for (as well as pressuring) Apple Inc. (NASDAQ:AAPL) to raise its dividend. However, Apple decided to go in a different direction when they announced that they were increasing the stock buyback program from $10 billion to $60 billion. The $60 billion dollar buyback news was huge considering it represented about 15% of Apple’s total market cap at that time.
Rumors still exist about when or if Apple will launch a cheaper version of the iPhone. Speculation is rampant after one of Apple’s suppliers, Pegatron said that it plans to increase its workforce in China by as much as 40% in the second half of the year. Many shorts are banking on the announcement of a cheaper iPhone as well as the continued deterioration of Apple’s margins. Are they right? We will have to wait and see.
Netflix, Inc. (NASDAQ:NFLX): Provides Internet television network service that enables subscribers to stream TV shows and movies directly on TV’s, computers, and mobile devices in the United States and internationally.
Netflix has a market cap currently of $13.14 billion. As of Apr. 30, Netflix had short interest of 10.3 million shares, representing an increase of over three million shares since the end of March. The short float now stands around 20% with the days to cover ratio at 1.72 days. Analysts have an average price target of $210.00 on Netflix, which would reflect a decrease of roughly 10% from its recent closing price around $237.
The online streaming giant hit a new 52-week high and climbed back over $200 after the company’s earnings came in at the higher end of investors and analyst’s expectations two weeks ago. It seems that many shorts were forced to cover after the great earnings report that Netflix delivered. However, with the stock rising back around $220, you can assume that many shorts will likely be entering again in the picture soon. I expect the short interest numbers to keep climbing over the next several weeks as many investors will look to lock in some of those profits.
Baidu.com, Inc. (ADR) (NASDAQ:BIDU): Baidu, often called the Google of China, provides many different Internet search services. The company offers many programs to help internet users find information online, through links provided on its Website.
Baidu has a market cap currently of $32.47 billion. Baidu has $5.4 billion in cash with $1.9 billion in debt. The short float now stands around 4% with the days to cover ratio at 2.68 days. Analysts have an average price target of $113.18 on Baidu, which would reflect an increase of 20%.
Baidu missed analyst expectations posting weaker than expected revenues during its latest earnings report two weeks ago. However, future guidance was pretty much in line with estimates so shares have quickly rebounded since then. Shares have also increased because of its recent online video acquisition of PPS Net TV of which it bought for roughly $370 million.
Yandex NV (NASDAQ:YNDX): Yandex, often called the Baidu or Google Inc (NASDAQ:GOOG) of Russia, provides many different Internet search services as well. The company offers many programs to help internet users find information online, through links provided on its Website.
Yandex has a market cap currently of $8.80 billion. Yandex has over $348 million in cash and has no debt. The short float stands at less than 1% with the days to cover ratio at one day. Analysts have an average price target of $32.00 on Yandex which would reflect an increase of 20%.
Two weeks ago Yandex posted a 79% increase in first-quarter profit and raised its 2013 sales target because of the growth in online advertising. Yandex also said that sales may rise 30% to 35% this year, compared with its forecast in February for 28% to 32% growth. However shorts weren’t too impressed as they increased a little bit in their positions after the earnings were announced.
NYSE & NASDAQ Short Interest Total
Looking over a couple of stocks will not tell us the whole story of what is going on in the market. So lets take a look at what is taking place over at the Nasdaq. Based on the information we see that short interest totaled 7.59 billion shares at the April 30 settlement date, compared with 7.63 billion shares back on April 15, and 7.53 billion at the end of March. The short ratio, or the number of days’ volume represented by outstanding share positions, was 4.46 days of average daily volume, compared with 4.87 days for the previous reporting period.
The New York Stock Exchange (NYSE) based on information received from members and member organizations, had short interest increase to13.51 billion from 13.35 billion on April 15, which is far higher than the 404 million they had on March 28.
Looking over both the Nasdaq and NYSE figures we can see that short interest has been climbing since March. Are shorts preparing themselves to take full advantage of the sell in May go away theory? It looks to be so. So are they right? We will have to see over the coming weeks and months to better determine that question.
Conclusion
Some of these companies mentioned above have high short interest and float rates. Because of this, news good or bad can send these shares flying in one direction or another. Just look what has happened to Netflix over the years. Netflix fell from its 52 week high ($300) two years ago all the way down to $50. Now shares are back up in the $200 range. Talk about a roller coaster ride. Some investors exclusively look for high short interest targets with low floats like Netflix, to try and profit from a major short squeeze. However, investors should be reminded that what goes up, can come down just as fast also.
Short interest can be an important tool for investors if they keep an eye on how short interest is trending. Investors are always reminded that before making any investment, you should do your own proper diligence on any of the stocks mentioned in this article. Any material in this article should be considered general information, and not solely relied upon for making investment decisions.
The article Apple’s Short Interest Doubled: See What Happened to These Other Tech Stocks originally appeared on Fool.com and is written by Justin Giles.
Justin is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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