CNX Shorts Dig In, But Options Tell a Different Story

CNX Resources heads into its October 29 earnings report with one of the more contradictory positioning setups in the Appalachian gas space.

Short interest is meaningful and has been building. Bears hold 12.6% of the free float short, a level ORTEX classifies as high, and that position grew by roughly 10% over the past month even as the week-on-week reading has just begun to ease. Days to cover run at 9.4, so unwinding is not quick. Yet the borrow market offers no hint of a squeeze: availability at 303% means there are three times as many shares available to lend as are currently borrowed, and the cost to borrow is just 0.5%, barely changed from a month ago. Bears can add to positions cheaply and easily.

Options positioning tells the opposite story. Traders have shifted decisively toward calls in the run-up to the print, with the put/call ratio at 0.53, nearly 1.4 standard deviations below its 20-day average of 0.75. As recently as early October the ratio was running above 0.90. That rotation toward calls tracks the stock's own move: CNX has gained 8.4% over the past week and 17.7% over the past month, closing at $38.58. Peer RRC surged 17.7% in a single session Tuesday, and AR added 3.4%, signalling a broader re-rating across Appalachian gas that has pulled CNX with it.

The analyst community is largely unmoved by the rally. Morgan Stanley maintained its Underweight rating last week, lifting its target only to $34 from $32. Truist and Scotiabank both set targets at $34 as well. Mizuho trimmed its target to $38 from $42. The consensus sits at a mean target of $37.25, now fractionally below the current price after this month's run, making the Street collectively sceptical that the move is justified. The bull case rests on well productivity gains, Utica output up 13% year on year and a 132% improvement in West Virginia's Tier 1 dry gas window, plus expectations that AI data-centre and LNG demand will lift NYMEX prices. Bears point to a projected 3% decline in sales volumes from 2024 levels, free cash flow of just $66 million in fiscal 2025, and uncertainty around LNG offtake and pipeline capacity.

Valuation offers some support for the bulls: the stock trades at a P/E of 9.6x and an EV/EBITDA of 5.8x, and CNX ranks in the 89th percentile on earnings yield and 85th on EV/EBIT. On EPS surprise history it ranks in the 88th percentile, meaning the company has a strong track record of beating estimates. The last print, in late July, produced a 3.2% gain on the day. BlackRock added 1.2 million shares in Q3 and State Street added 542,000, both building into the stock, though retail attention has also been climbing, with Wikipedia traffic running at a z-score near 2.0 against the past 90 days, consistent with the broader sector momentum.

The print will test whether CNX's well productivity story can translate into numbers that justify a stock now trading above most analyst targets, after a month that has already banked a 17% gain.