Despite Wall Street upgrade, BBBY stock is ‘priced about right’

on Jul 5, 2021
  • B Riley initiates coverage on BBBY with a “Buy” rating
  • Bed Bath and Beyond is up almost 80% year to date
  • Bed Bath and Beyond popped in two occasions this year because of high short interest

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Bed Bath & Beyond (NASDAQ: BBBY) could be beyond reach after B. Riley initiated coverage on the stock with a “Buy” rating and a price target of $44, which is almost 33% up from current levels. BBBY now has four Buys, 12 Holds, and 6 Sells ratings.

Shares of Bed Bath & Beyond are up 80% year to date and the momentum may have stalled and it is “hard to get excited” at current levels, Chantico Global founder and CEO Gina Sanchez said on CNBC’s “Trading Nation.” This is despite the fact that Bed Bath & Beyond’s revenue and earnings forecast appear to be better than those of rivals. Despite the rare upgrade to a bullish stance from B. Riley analysts, ongoing cost-cutting measures, and an optimistic case from the company’s new management, Sanchez and another pro aren’t buyers of the stock.

BBBY stock is ‘priced about right’

Sanchez explained on “Trading Nation” that BBBY stock is “priced about right,” and there is nothing that points to it as a screaming buy. She added that the history of the stock as a favourite on the Reddit platform doesn’t help its cause. The stock also looks elevated at 20.5 times forward price-to-earnings. Sanchez said:

“Once that momentum has established itself in the market, you’re pretty much too late because those momentum trades in some of these meme stocks have nothing to do with fundamentals. If you’re just buying it for momentum, that is the worst reason to buy because you will inevitably be the greater fool in that story.”

BBBY short interest

Miller Tabak’s chief market strategist Matt Maley also told CNBC that the only way to play out is through BBBY’s short interest. The stock has popped in recent months due to the Reddit hype, but investors expecting a new surge higher may need to reconsider. The first time BBBY stock soared was in January amid the Gamestop Corp (NYSE: GME) craze. The second time around took place in June during AMC Entertainment’s (NYSE: AMC) surge. Interestingly on both occasions, BBBY had a considerably high short interest but now the stock has an “incredibly low” short interest.

He said:

People have to be very, very careful. If we get … another short squeeze, Bed Bath and Beyond is not going to be one of the stocks that’s squeezed like that.”