MRK reported Q1 earnings on May 26. The stock slipped 1.8% on the day. Two days later, options traders are still the most defensively positioned they've been all year.
The put/call ratio stands at 0.93 — a fresh 52-week high, and 2.0 standard deviations above the 20-day mean of 0.86. This is notable because the PCR was already at elevated levels before the print. It has not normalized post-earnings. Investors appear unconvinced the Q1 reaction settled the debate about what comes next for the company.
The next earnings event is not until August 4. That leaves nearly ten weeks of holding period — yet the hedging posture has, if anything, intensified since the result.
Short interest climbed 13.2% in a single day to 1.17% of the free float — the highest since late April. That is still an extremely low absolute level for a megacap pharma. The lending market remains effectively wide open, with availability essentially unlimited. Cost to borrow sits at just 0.36%, down sharply from a brief spike to 0.93% in mid-May.
The day-over-day jump in SI is worth watching, but it does not yet constitute a meaningful short thesis. What it does is align directionally with the options signal: incremental skepticism is building, not retreating.
The analyst community remains broadly constructive. Wells Fargo maintains Overweight with a $145 target. JP Morgan is at Overweight with a $135 target. UBS holds a Buy rating at $145. The mean target is $129.74, implying roughly 8% upside from the current $120.24 close.
One outlier: Citigroup reinstated coverage at Neutral with a $125 target on May 6 — the only major recent action at a cautious rating. The stock has gained 7.5% over the past month and 6.4% over the past week, recovering from its post-earnings dip with speed that suggests buyers stepped in below $115.
One understated data point: MRK's dividend score ranks at the 99th percentile on ORTEX factor rankings. For income-oriented holders, the yield provides a floor that may be limiting how aggressively the short side can press. The near-record-low cost to borrow confirms there is no urgency in the borrow market, whatever the options signal says about near-term sentiment.
What to watch: Whether the PCR normalises below its 20-day mean of 0.86 over the next two weeks. A sustained elevated reading through June would suggest the post-earnings hedging is structural, not residual.
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