Alaska Air Group enters June with its sharpest short-covering wave of the year, yet a conspicuous Sell rating from Citi hangs over a stock that has already rallied 14% in a month.
The positioning story is almost entirely about short sellers retreating. SI as a percentage of free float has fallen from roughly 14% in late April to 10.3% today — a drop of nearly 14% in shares outstanding over one month. That unwind accelerated in early May, when shorts held close to 16 million shares; they now hold under 12 million. The borrow market offers no resistance: availability is a loose 251%, meaning more than two and a half shares are available to borrow for every one already shorted. Cost to borrow is just 0.50%, barely above the cost of doing nothing. In short, bears who want to rebuild positions face no friction whatsoever — the covering reflects a change in conviction, not a squeeze.
Options traders are sending an even more bullish signal. The put/call ratio has dropped to 0.39, nearly two standard deviations below its 20-day average of 0.52 and close to the lowest reading of the past year. Call buying has dominated for almost two weeks straight. That is a meaningful shift from late April and early May, when the PCR ran closer to 0.58. The short score, an ORTEX composite of positioning pressure, has eased from 61.8 on May 26 to 58.2 this week — consistent with the covering trend and the call-heavy options market.
The Street, however, is not uniformly bullish. Most analysts sit above the current price: Goldman Sachs holds a Buy with a $61 target, BMO Capital raised its Outperform target to $55 after Q1 results, and the consensus mean of $57.50 implies about 31% upside from here. Citigroup is the outlier — on May 1, it cut ALK from Buy all the way to Sell, slashing its target to $32, well below the stock's current $43.91. That downgrade deserves attention: it arrives from a firm that was previously constructive on the name, and the gap between the $32 target and where the stock is trading has only widened since. The most powerful bull case is EPS momentum — 30-day estimate revisions rank in the 97th percentile, and forward EPS growth year-on-year is sharply positive. The bear case, articulated by Citi, centres on softer summer bookings and margin risk in a competitive capacity environment.
Peer behaviour this week adds nuance. JBLU fell 6.6% over the past five days and AAL dropped 6.2%, while ALK posted a marginal gain of 0.3%. DAL and LUV were also flattish. ALK is clearly holding up better than the more leveraged carriers, but that relative strength has also compressed the discount to consensus targets — making the Citi bear case less obviously wrong than it looked a fortnight ago.
Insider activity gives a quiet read against the rally. The CFO sold $1.37 million worth of stock in February at around $57, and the CEO sold over $800,000 at $55. Both were at prices considerably above today's $43.91. Those were likely programmatic sales around equity awards rather than a directional call, but the direction of travel — executives lightening up near the highs, stock now 20% lower — is worth noting as the July 23 earnings date approaches. The last two prints produced negative five-day returns of 7.3% and 8.6% respectively, even when the immediate reaction was muted.
The question heading into Q2 results is whether the EPS estimate upgrades — the clearest positive in the current data — translate into actual beats, or whether Citi's caution about the demand environment proves more prescient than the consensus implies.
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