Watsco has dropped 7.3% this week and 10.1% over the past month, closing at $386.82. But the options market is telling an almost opposite story to the short sellers — and that divergence is the most interesting thing about the stock right now.
The clearest signal is in options. The put/call ratio collapsed to just 0.07, essentially at its 52-week low of 0.067. That is nearly 2.3 standard deviations below the 20-day mean of 0.44 — an unusual surge in call-relative positioning even as the stock slides. Two weeks ago the PCR was above 0.53; it has nearly halved since. Options traders are not hedging the dip — they are buying into it. That is a striking contrast with a stock that has lost a tenth of its value over the past month and is sitting on an RSI of 36, well into oversold territory.
Short positioning tells a quieter, and arguably more constructive, story. SI % FF has been edging down all week, falling from 10.5% at the end of April to 9.2% today — the lowest level since before the April 23 step-change in positioning that pushed the short count above 10%. The month-on-month figure still shows a 16% rise in shares short, reflecting that late-April build, but the direction of travel in May has clearly reversed. Borrow costs remain low at 0.56% APR, barely changed on the week. Availability is ample at 340% of SI — roughly three shares available to borrow for every one already out on loan — so there is no mechanical pressure on existing shorts. The ORTEX short score of 61.3 has drifted lower from a week-ago peak near 63.6, consistent with the unwinding trend.
The Street is cautious but not bearish. The mean analyst price target is $424.70, implying around 10% upside from current levels. The most recent action in the data — Stephens & Co. raising its target to $485 while maintaining Overweight after Q1 results in late April — stands as the clearest bull-side signal, though JP Morgan and Morgan Stanley both have neutral ratings and JPM's target of $400 is much closer to where the stock is trading today. Multiples have compressed: the P/E has fallen roughly 4.3 points over 30 days to just under 29.4x, and EV/EBITDA has pulled back to 19.7x. The dividend score ranks in the 98th percentile — Watsco's income credentials remain robust with a forward yield near 3.3% — but growth factors are less compelling, with EPS momentum at 30 and 90 days both below the 50th percentile.
The Q1 earnings release on April 28 delivered the recent damage. The stock fell 6.2% that day and continued lower, closing the five-day window down 7.9%. That reaction was more severe than the Q4 print, which produced a milder 1.3% day-one decline. Peers have also struggled: BXC shed 11.2% on Tuesday alone and ALTG dropped 14.6%, while FERG and CNM each fell 6-7% on the week. The sector-wide pressure limits how much of WSO's weakness reads as company-specific.
Capital Research and Management added 759,669 shares in the most recently reported period, lifting its stake to 14.2% — the largest institutional holder by some margin. BlackRock added 404,677 shares to reach 10.1%. Those are material additions from long-only managers buying into the early 2026 weakness, which provides some structural support beneath the price. The next catalyst is Q2 results, scheduled for July 30. Between now and then, the gap between the call-heavy options positioning and the post-earnings price slide is the tension most worth watching.
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