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Struggling retailer? Check. High short interest? Check. Soaring share price? Why, of course. Bed Bath & Beyond (BBBY) is displaying all the characteristics of a high-flying name in January 2021’s wacked stock market.

BBBY shares are up by 198% year-to-date, driven by... well, not much really.

Which is why Raymond James analyst Bobby Griffin has just downgraded BBBY from Strong Buy to Market Perform (i.e. Hold). The analyst’s $26 price target remains, suggesting downside of 29% from current levels. (To watch Griffin’s track record, click here)

The downgrade is not “a reflection on Bed Bath & Beyonds turnaround potential, the 5-star analyst said. “We continue to believe that the new management team understands the core issues within the business and has already started to show progress in recent results (gross margin, comps and asset sales).”

Griffin also notes that in contrast to other retailers, the company’s ~$2.2 billion of available liquidity presents management with “ample flexibility to tackle the turnaround.”

But BBBY remains a “prove me” story, says Griffin, and there hasn’t been any “meaningful change in the retail environment or fundamentals of the business,” to justify the recent surge.

The home goods retailer has been siphoning off several of its underperforming businesses and has made improvements to operations, but the company is still in the early stages of the turnaround efforts. The elevated share price now means that the stock is “trading above many of its specialty retail peers.”

As a result, Griffin expects the stock to “give back some of its recent gains,” as the rise has less to do fundamental new holders coming on board and “most likely been driven by a short squeeze.”

The analyst summed up: “While predicting when this activity will end is challenging. We think it is prudent to take a breather on our positive rating as BBBY is now trading at ~21.2x our FY21 adj. EPS estimate of $1.45 (~25x the consensus $1.25).”

Looking at the consensus breakdown, the rest of the Street agrees. The stock has a Hold consensus rating, based on 2 Buy ratings, 7 holds and 2 Sells. Over the next 12 months, shares are expected to shed ~46% of their value, going by the $28.63 average price target. (See BBBY stock analysis on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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