To The Moon

Growth investors just got a painful reminder of how fast momentum can turn. This earnings season has been brutal for high-valuation, high-expectation names — and the scoreboard so far shows the shorts firmly in the lead.

Companies that entered Q2 with lofty multiples and optimistic outlooks have been hammered when results didn’t absolutely crush expectations. Even small revenue misses or cautious guidance have been met with double-digit percentage selloffs. That’s the reality when stocks are priced for perfection — anything less feels like failure.

Why the Wipeout?

Guidance Shock – Many growth names are signaling slower revenue ramps into the second half of 2025. With rates still relatively high, funding costs and discount rate effects hit these valuations harder.

Margin Squeeze – Higher input costs and wage pressures are squeezing operating margins. For many growth companies still chasing profitability, that means deeper losses than expected.

Overcrowded Trades – Some of the most punished names were heavily owned by retail and momentum funds. When selling starts, it snowballs as stop-losses trigger and profit-taking accelerates.

Bears in Control

For short sellers, this has been the kind of environment they dream about:

High beta stocks collapsing 15–30% on earnings day

Volatility spikes boosting put options’ value overnight

Crowded long positioning giving them fuel for quick, deep drops

Put buyers in particular have scored big wins on names that missed by even the smallest margin.

Is the Pain Over?

Not necessarily. If upcoming earnings from major growth sectors — especially tech and speculative consumer names — show the same pattern of slowing growth and cautious guidance, more downside could be ahead. Short sellers could keep pressing until valuations reset to a level where even slower growth looks attractive.

But There’s a Risk for Shorts Too

The same volatility that works in a bear’s favor can work against them if sentiment flips. Growth stocks that are oversold and still have strong long-term narratives can stage vicious rebounds. That means timing is everything — and overstaying in a short can be just as costly as chasing a falling knife.

Final Take

This earnings season has been a reminder: in growth land, perfection is the price of admission. Miss it, and the market shows no mercy. For now, bears are cashing in. The real question is — will they take their profits, or keep betting that the pain isn’t over?