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RIO heads into its October 14 quarterly production release with short sellers quietly covering and the borrow market effectively open for business, a backdrop that stands in contrast to the stock's 9% slide over the past month.
The most telling shift in positioning is in the lending market. Availability has expanded sharply, climbing to over 4,300%, roughly three times where it was in late September when it briefly dipped to around 1,460%. That loosening means anyone wanting to bet against Rio faces virtually no friction in finding shares to borrow, with cost to borrow running at just 0.35%, down about 10% on the week. Despite that ease of access, short sellers have been reducing exposure: shares short have fallen roughly 11% from mid-September highs near 10 million shares, a steady unwinding that points to a lack of conviction on the bearish side rather than a forced squeeze. Options positioning confirms the muted caution, with the put/call ratio at 0.71, only modestly above its 20-day average of 0.67 and well below the 52-week peak of 1.08. That's not the kind of defensive tilt that precedes a print where the market is genuinely nervous.
The analyst debate reflects a real split between the commodity cycle optimists and those who have turned more cautious on timing. Morgan Stanley initiated coverage in late August with an Underweight rating and a $90 target, pointing to concerns about near-term earnings momentum. Bernstein has held the other side, maintaining an Outperform stance and nudging its target up to $89.50, a step in the right direction but still below the current $94.78 price. The broader consensus is a Hold, with a mean target of $103.48 implying meaningful upside from current levels. The tension is straightforward: bulls are anchored to the forward valuation story, with the PE sitting around 11 times and the EV/EBITDA near 5.9 times, both reasonable for a major miner with a dividend yield score ranking in the 97th percentile. Bears question whether iron ore and copper volumes can support those multiples given that the 90-day EPS momentum rank has slipped to the 24th percentile, even as the 12-month forward earnings growth score sits at the 57th.
The stock's earnings history is worth noting. The last three reported events all produced positive one-day moves: roughly 6%, 2.6% and 1.9% respectively, with five-day follow-through consistently in the 7% to 11% range. That skew suggests the market has generally been positioned too cautiously into Rio's releases, though each of those prints arrived against a different commodity backdrop.
Wednesday's production numbers will test whether the volume trajectory, particularly in iron ore and copper, justifies the recovery from September lows or whether the 9% monthly decline has already partially priced in a softer operational update.
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