Lumentum Holdings enters its May 7 earnings report riding a remarkable short squeeze. The stock is up 26% over the past week and 20% over the past month, closing at $994.56 — yet options traders are hedging hard into the print, and the gap between current price and mean analyst target adds a layer of tension to the setup.
The most striking shift in the data is the collapse in short interest. Bears have been covering aggressively. Short interest as a percentage of the free float has fallen from a peak near 16.6% in late March to just over 11% now — a drop of roughly a third. The pace of covering accelerated around April 23, when SI fell sharply from 13.6% to 11.4% in a single session. Borrow availability remains loose: the cost to borrow is just 0.51%, and borrow availability is well above stressed levels, confirming there is no squeeze pressure in the lending market. Shorts who remain are not trapped.
Options positioning tells a very different story. Caution has visibly increased ahead of the print. The put/call ratio jumped to 1.19 on May 5 — more than two standard deviations above its 20-day average of 0.94, and just below the 52-week high of 1.29 hit on April 30. That is the most defensive options posture of the past year. The juxtaposition is notable: short sellers are retreating, but options buyers are loading up on downside protection.
Analyst activity has been broadly constructive but the targets show a wide range of conviction. Stifel raised its target to $1,100 on May 5, maintaining a Buy. Rothschild initiated at Buy with a $1,270 target last week. JPMorgan raised to $950 in early April. But Morgan Stanley, keeping its Equal-Weight stance, lifted to only $710 — well below the current price. The consensus mean target of roughly $905 now sits below where the stock is trading, which reflects how sharply the rally has outpaced the Street's re-rating. The bull case centres on next-generation gross margins clearing 45%, a projected $140 million sequential revenue increase, and accelerating 68% year-on-year growth in the Components segment. The bear case focuses on supply chain fragility in EML chip production, concentrated customer exposure, and the risk that hyperscaler capex discipline trims demand.
Institutional buyers have been building. FMR added over 3.2 million shares to reach a 12.7% stake, Vanguard added 1.8 million shares, and JPMorgan Asset Management added over 1 million shares — all in the most recent reporting period. The one prior earnings event with reaction data on record, the February 2026 print, saw the stock gain 14% on the day and hold 12% of that gain over five days.
The earnings report will test whether the operating leverage story that has driven covering and institutional accumulation can survive contact with the margin and revenue guidance, or whether the defensive options positioning reflects a well-founded concern that the rally has run ahead of the fundamental reality.
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