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Why Michaels Shares Gained 88% Last Month

By Anders Bylund - May 11, 2020 at 12:31PM

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Investors saw some light at the end of the COVID-19 tunnel last month, but it might be an oncoming train.

What happened

Shares of Michaels (MIK) rose 88% in April 2020, according to data from S&P Global Market Intelligence. All told, the arts and crafts retailer has seen its share prices triple from the all-time lows it recorded in mid-March. The company had no substantial news to share until the very end of April, where Michaels announced a contactless package pickup partnership with UPS (UPS 0.29%).

So what

The UPS collaboration allows Michaels customers to order items for pickup at a nearby UPS Store; the shipping service will also accept returns at the store, and the shopper never needs to enter the physical store.

Anything that helps Michaels execute business transactions during the COVID-19 pandemic has to be seen as a positive move. Other than that, Michaels stock rose on an increasingly optimistic view of the retail industry in this global health crisis.

Standing at the edge of a cliff, a businessman looks down into the crevasse.

What's next? Image source: Getty Images.

Now what

Some might look at Michaels' quick rebound and call it a "dead cat bounce." The stock is trading 63% lower in 2020 even though it tripled in six weeks. I thought that Michaels looked like an affordable turnaround play in February because the company appeared to have found ways to stay relevant despite an onslaught of e-commerce rivals, but I underestimated the coronavirus issue at the time.

This volatile stock is best watched from the sidelines. Any investment in Michaels -- whether you're buying the stock or selling it short -- is a risky gamble at this point.

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Stocks Mentioned

The Michaels Companies Stock Quote
The Michaels Companies
MIK
United Parcel Service, Inc. Stock Quote
United Parcel Service, Inc.
UPS
$185.17 (0.29%) $0.54

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