LI enters the final stretch before its August 27 earnings report with the lending market fully locked, options traders at their most defensive in a year, and a stock that has shed 28% since January — a setup where caution is clearly winning over conviction.
The most striking data point this week is in options. Put demand has surged to its highest level of the past 52 weeks, with the put/call ratio hitting 1.17 — well above its 20-day average of 0.74 and running 1.56 standard deviations elevated. Just four weeks ago, in late June, the PCR was near its annual low around 0.38. That reversal — from the most bullish options stance of the year to the most defensive, in under a month — tracks almost exactly with the stock's deterioration. LI has fallen 7.6% over the past month to $12.21, losing another 2.1% this week alone.
The borrow market tells the same cautious story. Availability has been near fully exhausted for weeks — every share in the lending pool is currently lent out. Availability now runs at just 12.9%, meaning for every share available to borrow, roughly eight are already out on loan. That marks a dramatic tightening from the 52-week trough of near zero in late June, when the market was even more strained. Cost to borrow, however, has eased sharply — falling nearly 47% in a week to 1.07% — suggesting the squeeze pressure on existing shorts has softened even as the overall borrow pool remains very tight. Short interest itself is broadly stable, hovering near 25.4 million shares with less than a 0.1% change on the week, and the ORTEX short score of 62.8 has been essentially flat for the past ten days.
The Street remains largely sceptical. Recent analyst moves have skewed in one direction: lower targets. HSBC trimmed its target to $15.60 in June while holding a Hold rating. Barclays cut to $14.00 from $18.00 in late May. JP Morgan maintained an Underweight with a $15.50 target in March. The mean price target across the analyst community stands at $123.92 — a figure that almost certainly reflects stale data or a mismatch with the ADR-equivalent pricing at the current $12.21 level, so that consensus figure should be treated with caution. What is consistent across recent moves is the direction: multiple firms cutting targets post the May earnings miss, when LI fell 4.9% on the day and 7.7% over the following week. The March print saw a similar pattern — down 5.2% on the day, down 6.5% over five sessions. Two consecutive quarters of negative post-earnings reactions set a clear backdrop for the August 27 release.
One data point cuts against the bearish grain. LI's earnings momentum factor scores are exceptional — ranking in the 95th percentile on 30-day EPS momentum and the 99th on 90-day EPS momentum, with EPS surprise also at the 95th percentile. The short score rank of 10 and utilization rank of 1 confirm that the borrow situation is extreme relative to the broader market. The gap between the fundamental momentum numbers and the market's defensive positioning is the central tension heading into August: the company has been consistently beating earnings estimates, yet the stock continues to drift lower and option traders keep reaching for protection.
On the ownership side, the register is concentrated and stable. Founder Xiang Li holds 23.5% with no reported change. Meituan holds 13.1%, also unchanged. BlackRock added a modest 482,000 shares through June 30, taking its stake to 4.5%, while Dimensional and Geode each added smaller positions. No institutional selling of note is visible in the most recent disclosures.
What to watch heading into August 27 is whether the earnings momentum scores — among the strongest in the universe — translate into a result that breaks the two-quarter pattern of post-print declines, or whether the defensive options positioning and fully exhausted borrow market prove the better read on sentiment.
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