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Bed Bath & Beyond: Can Meme Traders Save the Stock?
Stock Analysis & Ideas

Bed Bath & Beyond: Can Meme Traders Save the Stock?

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Bed Bath & Beyond stock is seeing volatile price action ahead of its upcoming strategy meeting. However, that strategy meeting isn’t likely to deliver on every front that investors are looking for, especially for getting customers back into stores.

Bed Bath & Beyond (BBBY) was initially up in premarket trading on Tuesday due to tomorrow’s planned strategy meeting that will better detail the company’s larger turnaround plan. “Meme traders,” who have put quite a bit of backing into Bed Bath & Beyond already, rushed in to buy shares. However, it doesn’t appear that meme traders can help the stock at the moment because the double digits gains at market open quickly evaporated.

The last 12 months for Bed Bath & Beyond shares have been pretty volatile. The stock spent the last 12 months trading in a range between a little over $4 per share and just over $30 per share.

The general trajectory over the last 12 months, however, has been down. A couple of spikes notwithstanding, the company started off at just over $27 this time last year and now trades at less than half that, just over $12.

While there is certainly hope for Bed Bath & Beyond, that strategy meeting tomorrow is going to have to pull a miracle out of its hat to truly get anywhere. I’m bearish on this company overall because there are too many alternatives to its offerings and too many people who won’t want any of it anyway.

Investor Sentiment is Surprisingly Mixed for BBBY Stock

There’s one immediate problem with Bed Bath & Beyond’s investor sentiment: the aggregate. Right now, Bed Bath & Beyond has a Smart Score of 1 out of 10 on TipRanks. That’s the lowest level of “underperform” and the lowest score period as well. That makes it nearly certain that the retailer will ultimately lag the broader market. As bad as that is, it doesn’t seem to be daunting Bed Bath & Beyond insiders much. Currently, insiders are buying BBBY shares and doing so at a fairly rapid clip.

There’s one exception to this, however, and that’s kind of weighing on the average a bit. About two weeks ago, Ryan Cohen sold off a major portion of his holdings, valued at around $105.8 million.

When Cohen’s ultra-sale is removed from the picture, there’s actually much more buying than selling. Insiders staged 18 buying transactions in the last three months while only selling shares twice. Pulling back to the full year, meanwhile, shows more buying interest. Buyers again led sellers by a ratio of 34 buy transactions to 17 sell transactions. That’s two buyers for every seller.

A Fourth B for BBBY Stock: Bad News

Right now, the calculus just doesn’t work well for Bed Bath & Beyond. The company has already suffered just by being brick-and-mortar retail in a time when online retail is increasingly eating brick-and-mortar’s lunch.

Worse, its massive stores—which require quite a bit of heat, light, water, and other bills to keep them running—don’t really have all that much in them that people are looking for. Customers grow weary of product shortages.

How bad is it? Well, just a week ago, reports emerged that the company’s suppliers are outright halting shipments over unpaid invoices. Worse, those same reports are also noting that those suppliers can’t get credit insurance and short-term financing. Is Bed Bath & Beyond’s performance connected to those credit revocations? It may just be a coincidence, but the two did happen right around the same time.

It doesn’t exactly help that, in those same reports, CNN referred to Bed Bath & Beyond stores as “unkempt.”

However, there are some signs of a potential win to come with tomorrow’s strategy meeting. Investors already have several issues they’d like to see addressed during this meeting. The more of these Bed Bath & Beyond can address, the better off it will likely be.

Fresh supplies of cash, measures to bring customers back into stores, the issue of private label merchandise, problems with the supply chain, and the potential sale of Buybuy Baby are all in investors’ line of sight.

Some of these are already in progress. Reports of a $400 million loan from Sixth Street Partners have emerged, but no one will confirm. Some of Bed Bath & Beyond’s private label goods have proven more effective than others, and Buybuy Baby’s divestiture doesn’t seem likely; it was cited as a high point of April’s earnings call.

The farther the company can go toward reassuring investors that it’s working toward success along the lines investors have already stated they want to see, the better for the company overall. However, investors are likely to wind up balked in the areas of improvement they most want to see.

Bed Bath & Beyond’s earlier attempts to compete on price didn’t exactly go over well—it’s hard to compete with online stores on price, thanks to their lower overhead. Nevertheless, its private-label merchandise didn’t exactly get a lot of attention either.

Some are recommending the company go back to its earlier strategy of handing out discount coupons like candy at a parade. This isn’t a bad strategy; people feel increasingly pinched by inflation these days, so offering discounts does help.

Is BBBY Stock a Buy?

Turning to Wall Street, Bed Bath & Beyond has a Strong Sell consensus rating. That’s based on one Hold and 12 Sells assigned in the past three months. The average Bed Bath & Beyond price target of $3.54 implies 74.53% downside potential. Analyst price targets range from a low of $2 per share to a high of $7.50 per share.

Conclusion: A Likely Disaster is Brewing for BBBY Stock

There are some paths to success for Bed Bath & Beyond, but even these are of a limited sort. Yes, investors are pretty clear on what they want to see out of the company. However, what they want to see more than anything is profit, and right now, Bed Bath & Beyond doesn’t look like it’s in a good place to generate that profit.

It’s already trading at around double its highest price target. The meme stock trade has seemingly inflated the stock’s price beyond reason. Its ability to compete is somewhat limited, and we’re going into a set of macroeconomic conditions that will hamper most retailers.

That combination of factors adds up to bad news for Bed Bath & Beyond, and that’s exactly why I’m bearish. The odds of this company producing a viable turnaround strategy are minuscule. The company is already facing disaster on several fronts, and its odds of success are minimal, to say the least. It’s all bad news at Bed Bath & Beyond.

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