Kohl’s Corp Stock: Short Sellers Eye 56% Downside
Shorting stocks is hard, not because it’s technically complicated, but because good short setups are rare, and bad ones are punishing. We’ve learned that firsthand. After revisiting our earlier TSLA short, we’ve sharpened our criteria and narrowed our focus.
Now, we aim for situations where the business fundamentals, analyst sentiment, and capital structure all align in the same direction.
One stock currently showing these signs? Kohl’s Corp stock (NYSE: KSS).
Step 1: Look for Stocks That Are Near Their Deathbed
In general, short trades are tough because there are shareholders and even promoters for the most expensive stocks, which makes the life of a short trader very hard. One of the best examples here is GME or RGC, which we’ve recently covered.
Shorting a stock, even if the valuation is excessive, can be pretty volatile. Therefore, we are looking for stocks that are near their deathbed, characterized by declining sales and revenues, with estimates for the future indicating further decline. Moreover, it would be great if the company is leveraged at least 150%, so a Debt/Equity ratio of 1.5 or higher.
This is a complex step, and it is best that we give an example – Kohl’s Corp stock, courtesy of finviz.com:
- Sales are down about 5% over the past 5 years
- Earnings are down 26%
- Profit margins are only 0.75%
- Earnings are expected to increase next year by only 10%, after falling 70% this year
- Debt/Equity is 1.95
Yes, this company appears to be in dire financial straits, with a significant amount of debt hanging over it.
Step 2: Look for Large Short Interest
If there were a step in our TSLA analysis that, in retrospect, we should have been more careful with, it would have been this one. TSLA was shorted, but short interest was only 5%.
Here, we observe consistent short interest in Kohl’s Corp stock, typically exceeding 25%, and currently standing at 46%.
Short trades are expensive to hold, which is why a considerable short interest indicates a strong consensus: this company is in trouble. They could improve operational performance, but most likely, they will dilute shareholders. The equity portion remains high, at nearly $1 billion. If shareholders are reluctant to buy, the company can issue convertible bonds, and arbitrageurs will purchase the bonds and sell the stock.
Anyway, the key number for this step is: sustainable elevated short interest, preferably over 20%.
Step 3: The Stock Should Be on Average Hold or Lower with Analysts
Courtesy: SeekingAlpha.com
That picture should be pretty informative for our readers. Yes, nobody, or practically no one, likes Kohl’s Corp stock.
Roughly half the analysts rate it a Hold, the others rate it Sell or Strong Sell. There is one Strong Buy, but if 15 out of 16 specialists tell you something, the one exception is probably mistaken.
Step 4: Use Consensus Analyst Price Target as Entry and Risk Management
The consensus price target is $9.33, and the stock is currently trading at $9.16 per share. Generally, for the short idea to be effective, the price should consistently trade below the consensus. If the stock price rises significantly above consensus, this could be an indication that the fundamentals are changing.
So what is “too much”? That’s subjective, but at current levels, we believe $12.00 per share is too high. In general, we would average in that we would not short all at once, but rather over several days or even weeks.
Given that the price has already risen from $6.60 to $9.16, we are okay with shorting even at current levels.
GME Case Example: Why This Step Matters
In our opinion, GME is not a significant investment, to put it mildly. However, investors are very emotional about that stock and routinely pay more than analysts think it’s worth.
We’re not looking to be heroes here. If a stock trades consistently above analyst estimates, don’t short it. Step 4 is crucial for maintaining rationality.
Step 5: Target to Close
We use the lowest analyst price target as our closing guide. In this case, that’s $4.00 per share, which would be our hypothetical exit point.
That’s a potential 56% drop from current levels, from $9.16 to $4.00.
Anatomy of a Short Sell: Final Thoughts on Kohl’s Corp Stock
While most traders shy away from short selling, experienced ones are always on the lookout for a clean short setup. Statistically, down moves tend to happen more violently and quickly than upward trends, and if executed correctly, short trades can be practical tools.
To understand how to short stocks effectively, it also helps to understand the logistics of borrowing.
Stocks fall into two categories:
- Easy-to-Borrow (ETB) – your broker can usually locate shares for shorting
- Hard-to-Borrow (HTB) – the broker may not find availability, especially when demand spikes
Availability can change fast, even during the trading day. A stock may start as ETB and quickly become HTB, especially when retail traders pile in. At that point, you may need a “locate” to find and reserve shares to borrow. Some brokers charge for this, some don’t. What matters most is whether your broker can source the borrower in time.
Brokers who service professional traders and have well-connected borrow desks tend to have better access. Retail platforms often do not; they might block you from participating entirely.
Bottom Line
Kohl’s Corp stock is not a meme stock, but its fundamental profile and market structure put it squarely in the kind of setup we study closely. Based on:
- Declining performance
- Thin profit margins
- High debt
- Negative analyst sentiment
- Consistently elevated short interest
- Price trading slightly under consensus
- A clear downside target around $4.00/share
This is a textbook case for walking through our short framework.
Again, this is not a recommendation, but rather a case study on how we approach short trades structurally. Kohl’s Corp stock provides an illustrative example of how technical, financial, and sentiment-based indicators can align in a potential short setup.