The chorus of financial analysts, retail followers and just about everybody else out there is in agreement on one thing: Don’t buy Bed Bath & Beyond stock, it’s a company that is in deep trouble and may not make it.
Everyone, that is, except for investors and the stock market itself. While the BBBY stock is not performing well, it’s holding its own and not dropping to the levels many of these experts predicted. In fact, other than a meme-stock spike over the summer the company’s share price is essentially where it was in late June. In Monday morning trading, shares were trading at around $5.25, up 6% for the day and in the range of its recent pricing.
It’s a remarkable state given the retailer’s ongoing issues with top and bottom line performance as well as cash flow, balance sheet and management turmoil. Many outsiders are forecasting tough times ahead for Bed Bath, up to and including bankruptcy. Among the many out there:
• Goldman Sachs, in recommending shareholders sell their shares, is forecasting a target price of $2 and says it will have a tough time turning itself around.
• Telsey Advisory Group rates the stock as “underperform” with a target price of $3 a share.
• Entrepreneur magazine contributor Dipanjan Banchur, puts BBB in a class of four stocks “to sell before the end of 2022,” calling it “fundamentally weak.”
• The Street, an online financial newsletter, called Bed Bath “a retailer in a death spiral” and said its stock is “a clearance rack item you should almost certainly stay clear of.”
• CNBC, in a recent story, said BBB’s “merchandise problems will make it hard to pull off a turnaround this holiday season.”
• Yahoo Finance said in September that interim CEO Sue Gove “may be stuck with a sinking ship for now.”
Not exactly a chorus of ringing endorsements, so what gives, why is the stock continuing to defy the so-called experts? Well, company executives, from Gove on down, say they are on top of their problems and working to solve them. They have secured additional financing and lines of credit that they say will get them through the tough times until the turnaround strategy begins to pay off. And there have been recent reports that additional financial solutions are in the works to further tide the company over.
Then there’s the meme-trader phenomenon. Talk about defying logic. Bed Bath has been a favorite of day traders who seem to follow an online herd in propping up seemingly financially troubled companies, including others like Game Stop and AMC movie theaters. The rhyme-and-reasons behind these actions make little sense but they have caused surges in Bed Bath’s stock over the past two years, the most recent being this past August when its share price spiked to just over $23 in a dramatic rise that was only matched by the equally as fast crash over the following few days. It was at least the second such surge in the past year and as meme stocks go, it could certainly happen again, keeping the speculators interested.
Bed Bath & Beyond is coming into the critical holiday selling season with what can only kindly be called mismatched inventory and a sketchy balance sheet. It will need an outstanding performance for Christmas to start its recovery.
In the meantime, the disconnect between Bed Bath & Beyond the retailer and Bed Bath & Beyond the stock continues to be one of the great mysteries of the business world.
WarrensReport 