COST enters the week of its next earnings date with a striking reversal in options sentiment — and the question is whether that shift reflects genuine re-rating or simply relief after last week's post-earnings selloff.
The clearest signal right now is in the options market, and the story it tells has flipped sharply. The put/call ratio dropped to 1.09 on June 2 — two full standard deviations below its 20-day average of 1.26, and the lowest reading in the past 52 weeks outside of brief dips. For context, the PCR was running near 1.40 as recently as May 21, at the top end of the yearly range. That is a material rotation away from downside protection and toward calls. After a week where the stock fell nearly 5%, options traders are no longer paying up for hedges — they are leaning the other way.
Short interest tells a less dramatic story, but it is quietly building. SI rose roughly 11% over the past week to 1.68% of the free float — a level that remains low in absolute terms but marks the fastest weekly accumulation in over a month. The move is incremental, not alarming. Borrow remains effectively free at 0.35% annualised, and availability is extraordinarily loose, with hundreds of millions of shares available to lend. There is no squeeze dynamic here and no meaningful friction in the lending market. Shorts are adding, but cautiously and cheaply.
The Street remains broadly constructive, though targets have been recalibrated around last week's print. BofA lifted its price target to $1,200 from $1,185 on May 29, maintaining its Buy — a notable move given it came alongside the selloff rather than ahead of it. UBS had already raised to $1,275 two weeks prior. The cluster of Buy-rated targets in the $1,100–$1,275 range implies roughly 20–35% upside from current levels near $954. DA Davidson sits at the cautious end with a Neutral and a $1,000 target — essentially flagging the valuation as fairly priced at best. The PE sits at 44.5x and the EV/EBITDA at 27.8x, both of which have compressed modestly over the past month as the share price retreated. The factor score picture reinforces the bull-bear divide: dividend quality ranks in the 86th percentile, but the EV/EBIT score is in the bottom 5% of the universe — expensive by almost any earnings-based measure.
Insider activity offers one final data point worth noting, though it is unlikely to move the needle. The net insider position over the trailing 90 days shows net selling of just over $7.2 million across a handful of EVP-level transactions, all at prices between $916 and $1,003. The individual trades are routine in size and low in significance scores. The CFO sold 1,154 shares at ~$992 in March. None of these trades suggest anything beyond normal plan-driven liquidation — but the absence of any buying at current levels, after a 5% pullback, is a minor negative backdrop detail.
COST next reports on June 11. The prior note flagged the valuation gap as the central tension, and that framing remains intact. What has changed in the past 48 hours is the options market's posture: hedges have been unwound rapidly. Whether the PCR compression is driven by genuine conviction in the recovery or simply by short-dated call buying ahead of the print is the most interesting thing to watch between now and next Thursday.
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