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Bed Bath & Beyond (NASDAQ:BBBY) shares plummeted over 18% Tuesday after they were downgraded to Underperform by a Baird analyst on Tuesday.
The analyst maintained a $4 price target on the stock, telling investors the recent 148% surge in the company’s shares since July 27, including the +86% rise over the past two trading days, has been driven by “non-fundamentally focused market participants.”
“With market share losses accelerating and BBBY burning cash, fundamental risk/reward looks unattractive, in our view. We estimate BBBY would need to generate >$350M of EBITDA by FY24E/FY25E (vs. our FY22E/FY23E of -$350M/-$148M) to justify the stock’s current ~$2.3B enterprise value – a tall order given the current macro/sector backdrop,” said the analyst.
The analyst also pointed to BBBY results being weaker than its peers as trends in the home goods categories have changed rapidly following two years of COVID-driven demand.
“The decline in comps accelerated to -23% in F1Q (core Bed Bath -27%) from F4Q21’s -12%, and F2Q to-date was tracking down >20% as of late-June. Supply chain disruptions have exposed BBBY’s antiquated infrastructure and wreaked havoc on the business at the same time the company’s pivot toward owned brands has not resonated with customers,” added the analyst. “Interim CEO Sue Gove is focused on driving traffic via marketing and a new loyalty program; however, we believe turning the trajectory of fundamentals will be a tall order given the current macro/sector backdrop.”
