In a surprising turn of events, Tupperware Brands Corp. experienced a record-breaking surge in its stock price on Monday, seemingly out of nowhere. However, upon closer inspection, this sudden rally may not have been as unexpected as it initially appeared.
Over the past month, several stocks, such as Carvana Co., Upstart Holdings Inc., Coinbase Global Inc., Plug Power Inc., MicroStrategy Inc., Nikola Corp., Groupon Inc., and WW International Inc., have all witnessed similar surges due to a phenomenon known as factor rotation. It seems that Tupperware has now joined this club.
Tupperware’s stock also has a high short interest, estimated at around 23%, with a relatively low float. According to Samantha LaDuc, founder of LaDucTrading.com, when combined with momentum factor rotation, which occurs when the gap between crowded long positions and crowded short positions narrows significantly, heavily shorted stocks tend to experience a sharp increase in value. LaDuc herself was able to take advantage of this situation by expertly timing trades for her clients in Tupperware last Friday.
As a result, Tupperware shares surged an impressive 35.3% on Friday and continued their upward momentum by skyrocketing another 75.6% on Monday, marking the company’s largest single-day percentage gain in history.
Despite the lack of any significant market-moving news relating to Tupperware, LaDuc managed to foresee the stock’s surge by recognizing a pattern of rotation amongst oversold “value” stocks. This movement occurred beneath the surface while the S&P 500 remained relatively stagnant over the past month. Tupperware fit perfectly into this category of undervalued stocks.
It is worth noting that back in April, Tupperware issued a going-concern warning, expressing concerns about its financial stability. Fast forward to Monday, and the stock experienced a sudden surge in price based purely on speculative factors. Hedge funds have been reducing their short positions, which were previously profitable, as their investments in large-cap tech companies falter and decline.
This phenomenon, known as factor rotation, is not new to LaDuc. She has witnessed and traded it numerous times throughout her career.
In conclusion, Tupperware’s surprising surge can be attributed to a combination of factor rotation and short covering. While the stock price increase may seem unexpected at first glance, a deeper analysis reveals the underlying factors at play, shedding light on this extraordinary event in Tupperware’s history.
Related: Tupperware’s Stock Sees Largest Daily Gain on Record Amid Meme-Like Surge
Related: Tupperware’s Stock Pulls Back After Record Rally Exhibits Meme-Like Flashes
The Rise of Tupperware on Stocktwits
by Tom Bruni, Senior Writer at Stocktwits
Stocktwits, the renowned social platform for investors and traders, has recently experienced a significant surge in activity on its Tupperware stream. According to Tom Bruni, a senior writer at Stocktwits, the number of people adding the stock to their watchlist has grown by an impressive 20%. Moreover, the platform has witnessed message volume levels on Tuesday that are exponentially higher than any other day in the past year.
The last time such an uptick was observed was when Tupperware issued a warning regarding its financial stability back in April, causing a dramatic 50% drop in value in a single day. However, even compared to that time period, Monday’s message volume was approximately 500% higher, indicating renewed interest from both long-time observers and newcomers who have been attracted by Tupperware’s recent short squeeze.
Despite the gains seen on Monday, Tupperware’s stock has still suffered a substantial decline of 67.9% this year. In stark contrast, the S&P 500 index has achieved a gain of 19%.
Tupperware’s Financial Challenges and the Road Ahead
In its preliminary full-year results disclosed in March, Tupperware reported a significant sales decline of 18% compared to the previous year. During this time, Mariela Matute, Tupperware’s Chief Financial Officer, highlighted that the company anticipated 2023 to be a transitional year focused on stabilizing their business and improving their financial position.
To tackle their near-term challenges, Tupperware hired financial advisers in April alongside issuing a warning concerning their going-concern status. Furthermore, earlier this month, Tupperware entered into a waiver agreement with some of its creditors. However, it cautioned that it may not have sufficient funds available for an upcoming interest payment.
It is clear that Tupperware is going through a period of transformation and faces significant hurdles in the current market landscape. Investors and traders on Stocktwits continue to closely monitor the situation, eager to capitalize on any shifts or developments.