KTOS Bears Keep Fleeing as August Earnings Near

Short sellers have now cut their Kratos Defense & Security Solutions exposure by nearly a third in under a month. Options buyers are piling into calls. The cost to borrow is rising — not because the trade is tightening, but because what few remaining shorts exist are paying up to stay in.

All three signals point the same direction with two weeks until the August 5 earnings print.

Short Covering Deepens

Since the previous note on July 15, the exit has continued. Short interest now stands at 9.67 million shares — 5.7% of the free float. That compares to a peak of roughly 14.2 million shares in late June. Shorts have unwound nearly a third of the total book in four weeks.

The borrow market remains wide open. Availability sits at 1,386% — meaning roughly fourteen shares are available to borrow for every one currently borrowed. There is no squeeze dynamic here. Shorts are leaving because they want to, not because they're being forced out.

Cost to Borrow Jumps Despite Easy Supply

The cost to borrow has risen 54% in a week, reaching 0.39%. That sounds alarming, but context matters. It remains an objectively low rate. The move from ~0.23% to ~0.39% in one week is notable — but the borrow market is loose. With availability above 1,000%, this is not a sign of scarcity. It may simply reflect the shrinking pool of active shorts paying slightly more for what is now a contrarian position.

The CTB has actually been higher earlier this year — readings above 0.46% appeared in late June — so the current level represents a rebound from a dip, not a breakout.

Options Signal Confidence Ahead of the Print

The put/call ratio has drifted to 0.49 on Monday, up from the 0.45 low hit on July 17. That July 17 reading was 2.7 standard deviations below the 20-day mean — the most call-skewed positioning since early June. The ratio has since normalised slightly but remains well below its 52-week range midpoint. Call buyers have been in control.

This is a shift from the picture described in the July 15 note, when the PCR was essentially flat to its 20-day average. The options market has moved from neutral to modestly bullish in the week since.

Analyst Backdrop Remains Cautious

Goldman Sachs cut its price target to $89 from $100 on July 14, maintaining a Buy rating. The consensus target sits at $109. Against a current price of $45.94, that implies significant upside on paper — but the target compression trend has been consistent since May, when targets ranged from $75 to $130 across the Street.

Institutional holders added shares in Q2. BlackRock increased its position by 3.3 million shares to hold 16.9% of the company. T. Rowe Price added 1.6 million shares. ARK added 399,000.

Data Summary

• Short interest: 9.67M shares, 5.7% of free float — down ~32% from late-June peak
• Availability: 1,386% — loose borrow market, no squeeze pressure
• Cost to borrow: 0.39%, up 54% week-on-week from a low base
• Put/call ratio: 0.49, near its lowest level since early June
• Next earnings: August 5
• Recent price: $45.94, down 15.3% over 30 days
• Goldman Sachs PT: $89 (Buy), cut from $100 on July 14