Dow Inc. heads into its July 23 Q2 earnings report with analysts retreating and short sellers building positions — a combination that raises the stakes for what the company delivers on the morning of the print.
The most striking pre-earnings development is the coordinated move by the analyst community to slash price targets. In the three weeks before the report, every major firm with a view on DOW cut its target — some aggressively. RBC Capital downgraded the stock to Sector Perform and sliced its target from $51 to $28. BofA Securities, already bearish, trimmed from $35 to $29 — now sitting essentially at the current price of $29.92. BMO Capital cut from $46 to $33. Even bulls capitulated: Citigroup, holding a Buy rating, reduced its target from $41 to $35. The consensus mean now sits at $36.81, implying modest upside from current levels, but the direction of travel is unmistakable. The Street is resetting expectations downward ahead of the report.
Short sellers have noticed. SI has climbed roughly 34% over the past month to nearly 4.9% of the free float — a meaningful move for a large-cap commodity chemical name. The weekly jump is even sharper, with SI up almost 14% in the past five trading days alone. Despite that acceleration, the borrow market remains completely relaxed. Availability is extraordinarily loose at nearly 6,000% — meaning shares to borrow are essentially unlimited relative to existing short positions — and cost to borrow has actually fallen 28% over the past week to just 0.34%. There is no squeeze pressure here. Shorts can add freely, and there is no sign of forced covering.
Options positioning, by contrast, has turned less bearish than it has been. The put/call ratio has dropped to 0.96, now running more than one standard deviation below its 20-day average of 1.05 — close to its 52-week low of 0.66. That shift suggests some players are reducing downside hedges or rotating toward calls into the print, perhaps positioning for a relief rally if the numbers land better than the newly depressed consensus. The recent stock performance supports that read: DOW gained 3.1% on the week heading into earnings, even while the one-month return is still deeply negative at -9.2%. Closest peer LYB was up 5% on the week, and OLN added 6.3%, suggesting sector-level short covering may be lifting the group.
The bull case rests on margin recovery in plastics and silicones, anti-dumping measures curbing import pressure, and cost reduction programs. Bears point to demand weakness across industrial and consumer end markets, polyethylene margin compression, and tariff uncertainty. The 90-day EPS momentum factor sits in the 98th percentile — forward estimates have improved sharply on a year-on-year basis — but the 30-day reading is just in the 6th percentile, signalling that near-term revisions have turned negative again. That divergence is exactly the tension the Q2 report will resolve: whether the longer-term earnings recovery narrative is still intact, or whether the recent wave of target cuts is a preview of further estimate reductions to come.
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