A business update due Wednesday from
Bed Bath & Beyond
could send the meme stock still higher, or drag it back down.
The home-furnishings retailer (ticker: BBBY) stock has been the talk of the town, at least in some parts of the investing world. Between June 29 and Aug. 17, the price rose about 360% as retail investors bought up a stock that most analysts recommended selling. Only a few days later, activist investor Ryan Cohen sold RC Ventures’ entire stake in Bed Bath & Beyond, and the stock tumbled.
But on Monday, while the S&P 500 was down 0.3%, the stock was 30% higher at $13.92, rising in response to news that the chain is in talks with asset manager Sixth Street Partners to secure a $400 million loan. The latest appears means the stock has risen 211% from its 52-week closing low on July 6. So far in August, the stock is up 177%, on pace for its best month on record.
The retailer, which sells everything from bathroom décor to coffee pots, will provide investors with a strategic and business update on Wednesday before the markets open. Seth Basham, an analyst at Wedbush, said that he expects the company will provide an update “on its balance sheet outlook (including recently acquired financing), demand trends, and progress on ongoing cost saving initiatives.”
The possible financing comes after Bed Bath & Beyond burned through more than $300 million in cash and borrowed $200 million during its fiscal first quarter.
“We believe that the incremental financing should ease near-term concerns among suppliers and help restore inventory receivables financing that had reportedly become difficult to source for some vendors ahead of the key holiday period,” Basham wrote.
He said that the additional capital could “significantly decrease short-term liquidity risk and buy the company more time to address its bloated inventories, cost structure and market share losses.”
However, Basham is still bearish on Bed Bath & Beyond, as are most Wall Street analysts. Basham rates the stock as Underperform with a $5 price target. Among the 18 analysts tracked by FactSet, 67% rate the stock at Sell, 28% say it is a Hold, and 6% recommend buying the shares.
“Even in a soft demand environment, Bed Bath & Beyond’s market share losses are untenable and create risk into 2023 if Bed Bath & Beyond cannot improve its value proposition to customers,” Basham wrote.
He added that the company’s operational and balance-sheet challenges leave him cautious and that he believes the “current risk/reward still remains disproportionately skewed to the downside.”
Write to Angela Palumbo at firstname.lastname@example.org