ARCO, the largest McDonald's franchisee in Latin America, heads into the back half of May with a stock trading at three-month lows and an options market that has suddenly turned far more defensive — the tension between a still-modest short position and a sharp spike in put demand is this week's defining setup.
The clearest signal is in options. The put/call ratio jumped to 0.41 on May 19, more than three standard deviations above its 20-day average of 0.20 — the most defensive options posture the stock has seen in many months. That's a dramatic two-day move: the PCR had been running below 0.18 throughout April and early May before spiking to 0.39 on May 18 and then higher still. The timing maps onto a rough week for the stock, which fell 6.6% over the past five sessions to close at $8.07, extending a one-month loss to nearly 10%.
Short interest, in contrast, tells a less agitated story. Short interest is around 3% of the free float — meaningful but not extreme — and has edged up roughly 17% over the past month in share terms, rising from approximately 3.25 million to 3.58 million shares. That build is gradual rather than aggressive. Cost to borrow is a negligible 0.45%, and availability is exceptionally loose at over 1,300% of short interest, meaning there are more than thirteen times as many shares available to lend as are already out on loan. There is no mechanical squeeze pressure here, and no sign of bears fighting over a scarce borrow pool. The ORTEX short score of 36 — roughly the 51st percentile — is consistent with that picture.
The Street has gone cold on ARCO in a way that precedes the current selloff by several months. JP Morgan downgraded the stock from Overweight to Neutral in July 2025, cutting its target from $10.50 to $8.80, and then trimmed that target again to $8.70 in November. Banco Bradesco BBI followed with its own downgrade to Neutral around the same time. The most recent analyst data (from late April) shows a mean price target near $10.69, which implies roughly 32% upside from current levels — but those targets reflect a period when the stock was trading meaningfully higher, and the direction of recent analyst travel has been firmly downward. On valuation, the EV/EBITDA multiple has compressed over the past month by roughly 0.25 turns to 6.3x, while the P/E has de-rated by three full turns to just over 10x. Both moves reflect the price decline rather than any earnings revision. Factor scores offer one counterpoint: EPS momentum over both the 30-day and 90-day windows ranks in the 82nd to 92nd percentile, a signal that estimate revisions have been running ahead of the tape.
Ownership is concentrated and largely passive at the top. Founder Woods Staton controls 38% of shares outstanding and made no change to his position in the most recent filing. Lazard Asset Management, the second-largest holder at 11%, added over 1.7 million shares in Q1. SEI Investments built a fresh position of nearly 2 million shares in the same quarter. Against that, Brazil-focused SPX Equities trimmed its stake by 1.6 million shares in Q1 — a meaningful reduction of roughly 21% of their prior holding. Insider activity in early May was routine compensation-related: the CEO, CFO, COO, and Executive Chairman all received stock awards on May 8 and immediately sold the vested shares at $9.02, a mechanical disposal rather than a directional signal.
The earnings calendar is relevant context. A Q1 results release occurred today (May 20), with an announcement filed this morning. The stock fell 3.6% in the session following its most recent prior earnings report. The next scheduled event is in early October. What to watch in the near term: whether today's Q1 figures prompt any fresh analyst target moves — given the stock now trades below JP Morgan's already-lowered $8.70 target — and whether the unusual options positioning fades back toward its prior baseline or persists into next week.
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