ZBH Recovers Into Q3 Print as Shorts Rebuild

Zimmer Biomet has reversed the sharp pre-earnings weakness flagged in Sunday's note, gaining 1% on the week to $97.06 as the company reported Q3 results on November 4, but the recovery has come alongside a notable pickup in short positioning that wasn't there heading into the week.

The most interesting development this week is the speed at which short interest has rebuilt. At 4.5% of the free float, shorts are now at their highest level in roughly six weeks, up nearly 13% week-on-week. That's a meaningful move given the modest underlying level. What it isn't, however, is a signal of extreme conviction on the bear side. The borrow market has tightened sharply at the same time: availability dropped from around 1,289% a week ago to 868%, a fall of 44% in just five days. That's still a relatively loose market in absolute terms, with lenders holding nearly nine shares for every one already borrowed. Cost to borrow climbed to 0.56%, its highest reading in a month, up 14% on the week. The ORTEX short score has drifted up to 43.1 from 39.1 two weeks ago, a steady grind rather than a spike, and the lending dynamics suggest the short rebuild is being executed without friction.

Options positioning has eased slightly relative to last week's earnings-preview note, where the put/call ratio was running at 1.23. The PCR has edged down to 1.17 on November 3, almost exactly in line with its 20-day average of 1.15. The z-score of 0.09 is effectively neutral. The 52-week range stretches from 0.10 to 2.29, meaning the market has not moved to price in anything unusual on either side now that the Q3 print has arrived. The combination of a rebuilding short book and a cooling put/call ratio is a mild tension: equity options traders have backed away from the defensive stance they held into results, while short sellers are adding exposure.

The Street remains broadly constructive. The buy consensus is intact, with a mean target of $106.90 implying about 10% upside from current levels. The most recent activity is a reiteration from Argus Research at $125 on October 22, sitting well above where the stock trades, while Barclays initiated at Equal-Weight with a $100 target on October 7. The bull case centres on the Paragon 28 acquisition lift, the ongoing direct salesforce transition, and the 1Q26 EPS beat of roughly 12%. Bears point to account losses, the Kaiser Permanente nursing strike disruption, and the fact that the channel overhaul is not expected to complete until the end of 2027. On valuation, the PE has expanded 0.6 points over the past 30 days to 10.8x, and the EV/EBITDA has drifted slightly lower to 8.9x. The earnings yield factor scores in the 79th percentile, suggesting the multiple is not stretched on a cross-sector basis.

One institutional detail worth noting: Dodge & Cox raised its stake to 12.5% of the company in its August 2026 Schedule 13G/A filing, up from 11.2% previously. That makes it the largest institutional holder by a wide margin. Capital Research and Management added over 3 million shares in the most recent reported period, another sizable incremental buyer. No 13D activist holder is on the register. As the disclosure note states, 13D/G positions are event-driven and reflect stakes as last filed around the 5% threshold, so current levels may differ.

Wikipedia attention is running at a z-score of 2.7 against the past 90 days, a notably elevated reading for retail interest. That dataset has no measured lead to the company's financial figures, so it's colour rather than signal. What to watch from here is whether the short rebuild above 4.5% of the float continues after the Q3 results are digested, and whether Argus Research's outlier $125 target draws any company from the more cautious part of the consensus closer to its view.