Bed Bath & Beyond with Nobias Machine Learning: Is This ‘Meme’ Stock’s Turnaround The Real Deal?
Bed Bath & Beyond recently posted its first quarter results, which sent it stock soaring by approximately 20%. Unfortunately for the bulls, that pop was short-lived, with investors later selling shares as they digested the company’s results and listened to management’s growth plans during the conference call. BBBY shares are up nearly 8.2% during the last week; however, that rally still leaves the stock down nearly 30% from its highs posted one month ago. Showing the extent of BBBY’s 2021 volatility, we see that even down 30% during the last 30 days, Bed Bath & Beyond shares are up more than 76% on a year-to-date basis. Simply put, this stock has provided investors with a wild ride. And, with that being said, we wanted to take a look at what the blue chip analysts (4 and 5-star rated) tracked by the Nobias algorithm have had to say about the stock recently.
Throughout 2021, much of BBBY’s volatility has come from its relatively high short interest (right now, nearly 21% of the company’s shares are sold short, due to its poor performance, especially relative to peers in the retail space) and the “meme stock” rallies that have occurred with retail investors attacking shorts and attempting to inspire massive short squeezes.
Dan Caplinger, a Nobias 4-star rated analyst, recently touched upon BBBY’s volatility in an article titled “These 2 Nasdaq Meme Stocks Crashed Back to Earth Thursday” in which he highlighted Bed Bath & Beyond’s double digit dip in early June. On June 1st, BBBY shares were trading for just $27/share. On June 2, they shot up to north of $44/share. And then on June 3rd, they gave up much of those gains, falling back down towards the $32/share level. “Nominally,” Caplinger wrote, “Bed Bath & Beyond's move higher Wednesday came on the heels of an announcement that it plans to focus more on private-label brands in its inventory. Doing so would potentially capture a greater portion of the profit margin available on the goods it sells, which would be a positive for investors.” However, he also noted BBBY’s participation in the “meme stock” trade and after this sell-off, he said, “Past episodes of retail investor buying have ended with price spikes in Bed Bath & Beyond proving to be very short lived. The stock is still above where it traded before the latest move higher. But without greater fundamental improvement in its business, Bed Bath & Beyond could have a tough time sustaining its recent outperformance.”
With regard to the company’s actual performance, Hassan Maishera, a Nobias 5-star rated analyst, recently posted a Q1 recap article on Yahoo Finance, breaking down BBBY’s recent results. He said, “Overall, net sales for Bed Bath & Beyond surged by 49% to $1.95 billion from $1.3 billion a year earlier, surpassing the $1.87 billion estimated by analysts. Digital sales accounted for 38% of the company’s total sales as more customers continue the trend of buying online and picking up the products at a nearby Bed Bath & Beyond store.”
Maishera continued, highlighting BBBY’s bottom-line results, writing, “Following its jump in sales, Bed Bath & Beyond Inc. reported earnings per share of 5 cents adjusted vs. 8 cents expected. Meanwhile, the revenue was $1.95 billion vs. $1.87 billion expected. The retail company also managed to reduce its net loss to $51 million, or 48 cents per share, from a loss of $302 million, or $2.44 per share in the same period last year.” In short, the stock beat analyst estimates on the top and bottom lines. Management provided an upbeat tone throughout the report and raised full-year guidance as well.
During the company’s first quarter press release, Mark Tritton, Bed Bath & Beyond's President and CEO said, "We have started the year in a position of strength and are clearly on track to accomplish our goals. 2021 marks the first year of our three-year transformation following the groundwork we laid in 2020 – a year of historic and necessary change for this organization against the backdrop of unprecedented challenges due to COVID-19. For the first quarter, we delivered our fourth consecutive quarter of comparable sales growth with gross margin expansion exceeding our expectations. These results demonstrate continued momentum with our strategies as we progress towards the goals we outlined at year-end and at our Investor Day."
Evan Niu, a Nobias 5-star rated analyst, highlighted management’s bullish guidance in a recent article, saying, “Thanks to the momentum, the company raised its guidance for fiscal 2021. Bed Bath & Beyond now expects total revenue to be in the range of $8.2 billion to $8.4 billion, up from a prior forecast of $8 billion to $8.2 billion. Comps are expected to be in the low-single digit growth range, compared to the previous expectation of around flat.”
It’s clear that investors have bought into this vision, with the shares up nicely since the results were posted. However, not all of the credible authors that we track are believers in BBBY’s turnaround. Demitri Kalogeropoulos, a Nobias 5-star rated analyst who writes for The Motley Fool, recently published a bearish piece on Bed Bath & Beyond, highlighting his preference for another big-box retailer, Target (TGT). Kalogeropoulos began his piece by noting that BBBY has bounced back nicely from the 2020 lows, though the company’s operations are still struggling to generate strong longer-term growth. He said, “CEO Mark Tritton and his team celebrated the specialty retailer's increasing growth and profitability rebounds at the start of fiscal 2021. But the business is still shrinking as it closes underperforming stores, and there's a lot of uncertainty about where profitability will land after management is done with the company's three-year restructuring plan.”
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
Although BBBY’s revenue was up 73% from its 2020 trough levels, Kalogeropoulos was quick to note that the company’s sales only “rose 3% compared to 2019 levels”. He touched upon his belief that Bed Bath & Beyond has been late to the game in terms of the shift that we’ve seen the big-box retailers take with regards to adopting an omni-channel approach to sales. He wrote, “Bed Bath & Beyond is busy crafting an omnichannel selling platform that reflects consumers' growing desire to shop online and either pick up orders in stores or choose ultra-fast home deliveries.” And yet, even so, Kalogeropoulos believes that rival Target is the clear winner in the space, saying, “Simply put, you'll likely get better returns by owning a retailer with a proven multi-channel platform than by betting on a business that might build such a platform over time.”
Overall, the Nobias community has a favorable view of BBBY shares, with 75% of the credibly authors that our algorithm tracks posting a bullish outlook on shares. The average price target of the credible authors that we follow for Bed Bath & Beyond shares is $32.25. Today, BBBY shares trade for $30.28, which implies upside potential of 6.5%. During the past month, we’ve seen 4 and 5-star analysts post 19 research notes focused on the company. 11 of these came with “Buy” ratings. 3 of them offered “Neutral” opinions. And 5 of them were bearish.
As you can see, the majority of credible authors continue to be bullish on shares, which means that this turnaround story could turn out to be more than a “meme”. Bed Bath & Beyond is attempting to generate reliable fundamental growth which shareholders can benefit from over the long-term. Only time will tell if BBBY is able to carve out meaningful market share against its peers in the big-box retail space, yet the Nobias community of credible authors appears to believe that it can.
Disclosure: Nicholas Ward has no positions in any stocks mentioned in this article. Nicholas Ward wrote this article for Nobias at their request with a view of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
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Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.