Short selling in Qualcomm Inc (QCOM) continues to increase after the April 16th announcement of their legal settlement with Apple Inc (AAPL.) QCOM shares shorted have increased by 14.1 million shares, +76%, since the settlement even though its stock price has jumped by over $29/share, +51%.
QCOM short interest is $2.84 billion; 32.54 million shares shorted; 2.69% of its float. QCOM is the third largest short in the Semiconductor & Semiconductor Equipment sector and the largest riser in a sector where short interest has fallen by $1.6 billion, -5.2%, over the last month. The other big short mover in the Semiconductor sector is Marvell Technology Group (MRVL) whose stock price is up 26% in April after reporting solid 4th quarter results. MRVL shares shorted are up 40.2% in April as short sellers are shorting into a stock they believe to be overbought considering the firm has projected a 10% decline in 1st quarter revenues due to slackening customer demand due to tighter inventory control and overall uncertainty in Chinese demand.
We continue to see short selling today in QCOM, with over 300 thousand more shares shorted into todayâ€™s 1% drop in stock price. QCOM short sellers are down $527 million in year-to-date mark-to-market losses, -27%, in 2019, with all of the losses occurring after the AAPL legal settlement announcement ($616 million in mark-to-market losses.) With less than 3% of QCOMâ€™s float being shorted there is no danger of high stock borrow costs or recalls causing a technical stock loan based short squeeze. But with QCOM shorts already down -27% in mark-to-market losses for the year, a continued rally in the Semiconductor Sector and QCOM in particular may begin to force some short sellers out of their trade. Early Aprilâ€™s sudden and abrupt increase in QCOM shares shorted may reverse itself in the same manner. Short sellers may exit en masse if losses continue to mount or the rally shows no inclination of petering out.Â If shorts do capitulate in size, expect added volatility to QCOMâ€™s already inflated daily trading volumes and unchallenged price pressure to the upside.
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Managing Director Predictive Analytics, S3 Partners, LLC
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