Cuddle Up To A Position In Tempur Sealy Shares, Says Piper Jaffray

Analysts at Piper Jaffray turned bullish on Tempur Sealy International Inc TPX given expectations for a sizable earnings per share and EBITDA growth through 2020. The firm's Peter Keith upgraded Tempur Sealy's stock from Neutral to Overweight with a price target boosted from $61 to $80.

Part of the bullish case for Tempur Sealy's stock stems from a "strategic error" made by privately-owned Mattress Firm Holding Corp in which Mattress Firm terminated its relationship with Tempur Sealy. This has created a "sizable competitive window" for Tempur Sealy and others to target Mattress Firm's "weakened positioned."

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In fact, eight to 10 mattress retail chains are planning to aggressively target Mattress Firm's markets through 2020 and many of these chains "appear likely to emphasize the Tempur Sealy brands," the analyst said. This creates an opportunity for Tempur Sealy to be featured in at least 600 stores over the next three years.

Meanwhile, many non-Mattress Firm retailers saw a 20 percent year-over-year growth in sales of Tempur Sealy brands in June, which implies the brand is gaining sufficient momentum to displace Serta and Simmons and already existing retail doors, the analyst added.

Finally, Tempur Sealy's online sales continue to ramp higher and the opening of up to 100 of its own branded stores could handily replace the profit dollars it is losing from the termination of its relationship with Mattress Firm.