Churchill Downs Incorporated has spent May rewinding a sharp post-earnings rally, with shorts rebuilding at the fastest monthly pace in the data window and options tilting defensively — the clearest tension in the setup heading into next quarter.
The short-positioning story is the most striking development of the past month. Short interest has climbed 39% over 30 days to reach 5% of the free float, with most of that build occurring in a single step around May 9, when borrowed shares jumped by roughly 760,000 in a day. The pace has continued more gently since — up around 1.6% on the week — so the initial surge does not look like noise. Despite the build, borrowing costs remain extremely cheap at 0.43%, down around 9% on the week, and availability is extraordinarily loose at over 6,200% of short interest. That means the lending pool dwarfs the current short position by a vast margin: there is no squeeze pressure whatsoever, and new short sellers face essentially no friction in establishing positions.
Options traders are reading the tape cautiously too. The put/call ratio has run at 2.17 — well above its 20-day average of 1.69 — and has held above 2.0 for most of the past two weeks. The z-score of 0.8 is moderate, so this is not a panic-level reading, but the sustained elevation is notable. For context, the ratio sat below 1.0 through late April and early May, immediately after the earnings beat. The rotation from call-heavy to put-heavy in a matter of weeks tracks the price deterioration: the stock has fallen 18% over the past month, giving back most of the post-Derby surge, and dropped another 4.2% on the week to close at $83.07.
The Street remains firmly bullish on paper, but targets sit far above current levels. All eight covering analysts carry buy-equivalent ratings, with a mean price target of $137.25 — implying roughly 65% upside from current prices. The most recent move came from Macquarie, which trimmed its target from $150 to $145 on May 19 while holding its Outperform rating. Earlier in the quarter, Mizuho and Citizens both lifted targets following the April earnings beat, and Wells Fargo nudged its target to $130 in mid-April. The valuation multiples tell a compressing story: the P/E ratio has dropped by more than 2.5 turns over 30 days to 11.8x, and price-to-book has contracted by nearly 0.85x in the same period. EV/EBITDA at 8.6x has also drifted lower. These are not stretched multiples for a gaming operator delivering double-digit EBITDA growth in its racing segment — which is precisely the gap the bulls are pointing at.
The earnings backdrop supports the analysts' optimism, at least historically. The April 23 Q1 print delivered a 14% single-day pop and a 13.5% five-day move. The prior event also produced a 7.8% next-day gain. The stock has consistently rewarded holders into and through reporting days, with no negative one-day reactions in the available history. Next earnings is scheduled for July 29. The factor scores add nuance: the 12-month forward EPS growth rank scores in the 88th percentile of the universe, and the EPS surprise rank is at the 78th percentile — both consistent with a company that has been beating estimates and seeing upward revisions. The growth story has not broken.
Closest peer PENN gained 3.5% on the week and MGM added 3.7%, while FLUT and RSI fell 3.6% and 5.5% respectively — a mixed picture for the gaming complex that offers no clean read-through. What to watch into July 29 is whether the short rebuild stabilises or continues to accelerate as the stock approaches the lower end of analyst target ranges — and whether the put/call ratio cools back toward its April levels as the earnings catalyst draws closer.
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