Analyst: Better Days Ahead for Struggling Newell Stock

Short sellers and bearish options traders have been piling on NWL

Managing Editor
Apr 17, 2018 at 10:06 AM
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Newell Brands Inc (NYSE:NWL) stock is up 4.3% to trade at $27.38 this morning, after Wells Fargo upgraded the consumer products concern to "outperform" from "market perform," while issuing a price-target hike to $33 from $25. The analyst in coverage believes Newell's "individual businesses are very undervalued," and that "pending divestitures will unlock significant value."

The news today puts NWL shares in contention to close above their 50-day moving average for the first time in a month. Wells Fargo's new price target of $33 represents levels the equity hasn't seen since its earnings-induced bear gap in November that sent the security to multi-year lows. It's been more of the same in 2018; the equity has languished in the $25-$29 channel since a January bear gap, which stemmed from lowered guidance and plans to sell assets

Given the stock's troubles lately, it should be no surprise that short sellers keep piling on. Short interest increased by nearly 20% during the two most recent reporting periods. The 37.35 million shares sold short is the highest amount in two years, yet only represents 7.7% of NWL's total available float.

The options pits paint a similarly skeptical picture. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 10-day put/call volume ratio of 2.40, in the 82nd percentile of its annual range. Echoing this, NWL stock's Schaeffer's put/call open interest ratio (SOIR) of 1.49 ranks 4 percentage points from an annual high, showing a heavier-than-normal put-skew among options expiring within three months. 

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