Tempur Sealy Stock Soars on Mattress Firm Bankruptcy Reports

TPX was also upgraded at UBS

Managing Editor
Oct 3, 2018 at 9:29 AM
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The shares of Tempur Sealy International Inc (NYSE:TPX) are pointed 13.5% higher in electronic trading, on reports that mattress retailer Mattress Firm plans on filing for bankruptcy as soon as this week. In response, UBS has upgraded Tempur Sealy stock to "neutral" from "sell," while boosting its price target to $55 from $45. 

On the charts, Tempur Sealy stock rallied hard off its late-April lows near $41, trading up toward the $60 level by late August. The shares have pulled back since then, and were down 22.8% year-to-date at of last night's close of $48.38. However, should today's pre-market price action hold,, it will erase TPX's weekly deficit and snap a four-day losing streak.

Shorts have been heading for the exits, and this could keep the wind at the equity's back should they continue to cover. Short interest fell by 12.5% in the last two reporting periods, yet the 11.24 million shares sold short represents nearly 30% of TPX's total available float. At the stock's average daily pace of trading, it would take almost 15 days to buy back these bearish bets. 

In the options pits, short-term traders have been unusually call-skewed toward the stock. This is according to the security's Schaeffer's put/call open interest ratio (SOIR) of 0.23, ranking in the 4th percentile of its annual range. In other words, call open interest outweighs put open interest among contracts expiring within three months. What's more, during the past 10 days, the October 52.50 call has seen the highest increase in open interest, with more than 4,100 contracts added.

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