D.R. Horton heads into the back half of May in an unusual position — short sellers have been covering aggressively while the stock itself keeps falling.
The gap between short positioning and price action is the week's central tension. Short interest dropped sharply from a peak of roughly 6.4% of free float in mid-April to 5.5% now — a 14% reduction in just over a month. The move lower in SI is consistent with covering after a period of crowded positioning around the April earnings print. Yet the stock has shed 6% this week and 10% over the past month, closing at $134.72. Shorts are getting out of the way, but buyers aren't filling the gap.
The lending market is relaxed, and that tells a lot. Availability is extraordinarily loose at over 2,248% — meaning more than 22 times the shares currently borrowed are still available to lend. Even at the tightest point over the past 52 weeks, availability never fell below 716%. Cost to borrow has also eased, dropping 23% this week to just 0.35%. There is no squeeze pressure here. This is a stock where the bear case is not a crowded short trade — it's a fundamental view on housing demand. The put/call ratio at 1.28 is actually running below its 20-day average of 1.45, nearly two standard deviations lighter on put demand than recent norms. Options traders are hedging less than usual, not more.
The Street's post-earnings reaction was broadly constructive. Following the April 21 print — which sent shares up 5% on the day — Goldman Sachs raised its target to $190 while maintaining Buy, and UBS moved to $206 from $193. Several neutral and equal-weight holders also lifted targets, including Barclays to $140 and Wells Fargo to $170. RBC's bearish Underperform stance remains an outlier with a $123 target, now below the current price. The mean target across analysts is $165, implying around 23% upside from here — but that data is now three weeks old and the stock has continued to slide since those revisions. The PE multiple has compressed about 2.1 turns over the past month to 12.1x, and the price-to-book has fallen to 1.49x. The bull case centres on market share leadership, Forestar's land pipeline, and financial services revenue. The bear case is simpler: slowing orders, rising land costs, and macro uncertainty in the US housing cycle.
The sector-wide tone is soft. Homebuilder peers are broadly down on the week. TOL dropped 7.6% — the sharpest decliner in the group — while LEN fell 3.3% and PHM lost 3.1%. DHI's 6% weekly loss sits toward the steeper end of the peer range, despite having a less crowded short book than many of its rivals. The next scheduled earnings report falls on July 21, which gives the market roughly eight weeks to reassess the order trajectory that spooked investors last month.
What to watch: the disconnect between retreating short interest and continued price weakness is the live question — whether covering has run its course, or whether fundamental demand data in the coming weeks resets the picture heading into July's print.
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