Last trading day before results, only 1 of the past 8 reports closed higher, valuation re-rated to 28.7x, 29.2% short interest is squeeze fuel
Q2 results are due on Monday 10 Aug, after the close at 5PM ET. The key new input is first-hand historical data on the 'asymmetric reaction after results': in only 1 of the past 8 quarters did the stock close higher after earnings, and that one was a miss.
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The market no longer looks at single-quarter EPS but at the trend in earnings quality and the narrative. NTM EPS expectations have been cut for 5 straight quarters, NTM EPS growth is -60.3% and NTM revenue growth is 30.4%, and revenue growth without profit growth keeps being punished. The forward P/E has gone from 17.2x to 26.5x to 28.7x, a 1.3x premium to SPY, and the gap between a narrative-driven rise in valuation and worsening earnings expectations has reached a new scale. Short interest of 29.2% (the highest in the modelled universe) is real squeeze fuel, but historically the actual moves (14.1/12.4/18.1/22.3%) have repeatedly exceeded the implied volatility (IV) of 12.8%. The risk is large in both directions.
Key evidence
- In only 1 of the past 8 quarters (Q1 2025, at a 37.0x valuation) did the stock close higher after earnings, and that one was a miss
- Extreme cases where a beat did not lift the stock: Q4'25 had a 1,936% beat, then -0.3% on the day
- Q3'25: 3.5% beat, then -3.6%. Q2'25: 47.5% beat, then -12.4%. Last quarter, Q1'26: 322% miss, then -14.1%.
- NTM EPS expectations have been cut for 5 straight quarters (Q4'25 -24.8%, Q3'25 -23.0%)
- This quarter NTM EPS growth is -60.3% (the second straight quarter at this level) and NTM revenue growth is 30.4% (up): revenue is growing without profit
- Forward P/E: 17.2x in Q4'25, 26.5x in Q1'26, 28.7x now
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- The premium to SPY has widened from 0.8x to 1.3x
- Short interest of 29.2% (the highest in the modelled universe): real squeeze fuel
- Options imply a single-day move of 12.8%, and the last four actual moves were 14.1%, 12.4%, 18.1% and 22.3%, repeatedly exceeding the implied move
- Friday 7 Aug close of $31.59 (+6.5%), a rebound from $29.66 on 6 Aug, when it broke below the 50-day line, and back above the 50-day line
- Still down more than 50% from its year high of $70.43
- Consensus EPS of -$0.049 and revenue of $698.9 million
- The divergence between the narrative and the numbers: the narrative lifted the valuation first while earnings expectations worsened the other way, and the gap is now large enough to show up in the valuation multiple
Catalysts to watch
- Q2 results on Monday 10 Aug, after the close at 5PM ET (the only hard near-term catalyst)
- A beat plus strong forward guidance could set off a squeeze given 29.2% short interest, and actual moves often exceed the implied move
- A miss or flat guidance: the reactions in the past 8 reports point to a high probability of a fall, with the FTC lawsuit and the securities law firm investigations adding pressure
- Further disclosure on the peptide business, the key narrative holding up the valuation
- Progress on the securities law firm investigations and the FTC lawsuit, which keep weighing on the legal side
Risks
- The pattern of revenue growth without profit growth has not broken: NTM EPS growth is -60.3%, worse for a second straight quarter
- NTM EPS expectations have been cut for 5 straight quarters, and the trend in earnings quality is down
- The 28.7x forward P/E has already re-rated, at a 1.3x premium to SPY, leaving plenty of room for the valuation to be cut
- Only 1 of the past 8 reports closed higher: the market mindset that even a beat will probably not lift the shares is locked in
- The FTC lawsuit and the securities law firm investigations keep weighing on the legal front
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- Actual moves have repeatedly exceeded the implied move (14.1/12.4/18.1/22.3% against an implied 12.8%), so the cost of hedging with options may be underestimated
- The price is down more than 50% from its year high, and the rebound is fragile
Sources (6)
- Earnings-edge pre-earnings modelling (8 Aug): historical reaction data, valuation multiples, NTM EPS and revenue expectations
- Short interest data (29.2%, the highest in the modelled universe)
- Options-implied volatility and historical realised volatility data
- Close on Friday 7 Aug of $31.59, 50-day line at $29.66, year high of $70.43
- Consensus expectations of EPS -$0.049 and revenue of $698.9 million
- Continuation of earlier daily reports on 'narrative versus numbers divergence'
A brief is a lead for our research, not a verified conclusion or advice.