ESI Shorts Retreat Further as Earnings Land Today

Element Solutions Inc heads into its Q2 earnings release today with the most notable story being an abrupt and dramatic unwinding of short positions just ahead of the print.

Short sellers pulled back sharply in the final session before earnings. Short interest dropped 36% in a single day on July 24, falling to 3.5% of the free float — roughly half the level seen at the start of July, when it hovered near 6%. That single-session move erased the bulk of a short position that had been building steadily through June and early July. The borrow market reflects the same shift: cost to borrow has fallen to just 0.27%, down nearly 23% on the week, while availability has surged to 4,746% — one of the loosest readings of the past year. Short sellers are not just pausing; they are actively exiting.

Options positioning reinforces the bullish lean. The put/call ratio of 0.21 runs below its 20-day average of 0.26, meaning call demand continues to outpace puts despite the stock trading down roughly 17% over the past month to $37.84. The one-day and one-week rebounds — up 1.1% and 3.8% respectively — suggest buyers stepped in ahead of today's release, though the stock remains well below where it traded before the selloff began.

The analyst community is divided, and that divide sharpened just ahead of the print. Mizuho downgraded ESI to Neutral on July 15, cutting its target from $54 to $45 — the same analyst who had lifted the target only two weeks earlier. Against that, Truist and BMO both raised targets in early July, keeping Buy and Outperform ratings intact, with targets of $48 and $50 respectively. The consensus mean target of $47.38 implies roughly 25% upside from current levels. Bulls point to the Electronics segment's 11% year-over-year sales growth, driven by AI and data center demand, and to Industrial margin expansion of 420 basis points to 23.7%. Bears focus on EV volume declines pressuring power electronics, weak industrial and construction activity in the Industrial & Specialty unit, and the dollar's drag on a business where 77% of revenue is generated outside the US. The most recent earnings reactions have been uneven: a 6.8% single-day drop in May, then a 2.3% single-day gain in the prior quarter.

Today's print is therefore less about the AI electronics narrative — which the market has already priced in — and more about whether management can hold margins in the Industrial segment and offer enough reassurance on EV and macro headwinds to justify the gap between the current price and where analysts think it belongs.