Bed Bath & Beyond Up 53% In A Month, What’s Next?

Bed Bath & Beyond (NASDAQ: BBBY) has seen its stock grow by almost 53% over the last month (about 21 trading days), compared to the S&P 500 which grew only 2% over the same period. The company’s stock rose after the news broke that Ryan Cohen took a nearly 10% stake in the home goods retailer and is agitating for some strategic shifts. Cohen, who is a Chewy co-founder and GameStop chairman, is urging BBBY to explore alternatives, including a full sale or separation of the buybuy Baby business. The company could use a full or partial sale of buybuy Baby to pay off its debt, put cash on the balance sheet, and continue reducing its share count. The buybuy Baby division is expected to generate $1.5 billion in sales in fiscal 2023.

Bed Bath & Beyond continues to face challenges with supply chain issues and rising prices. The company’s comparable sales declined 7% year-over-year (y-o-y) and revenue plummeted 14% y-o-y to $1.9 billion in the recent Q3 2021. In addition, the retailer posted an adjusted loss of $0.25 per share in the third quarter. Going forward, the company now expects breakeven results at best in the fiscal full year, negative free cash flow, and adjusted EBITDA between $290 million and $310 million (down 43% from what it expected six months ago). As such, BBBY’s core issues will likely persist despite the proposed spinoff. However, these moves might help the company support the company’s finances which could further aid in its rebound strategy.

Now, is BBBY stock poised to decline in the short term or are gains looking more likely? Based on our machine learning analysis of trends in the stock price over the last ten years, there is only a 20% chance of a rise in BBBY stock over the next month (twenty-one trading days). See our analysis on BBBY’s Stock Chance Of Rise for more details.

Going by our BBBY’s Valuation, with an earnings per share estimate of around 79 cents and P/E multiple of 21.5x in fiscal 2021, this translates into a price of around $17, almost 26% lower than the current market price.

Calculation of ‘Event Probability’ and ‘Chance of rising’ using last ten years’ data

[1] Returns of 20% or higher over five-day period on 60 occasions out of 2516 (2%); Stock rose in the next five days in 28 of these 60 instances (47%)

[2] Returns of 5.9% or higher over ten-day period on 394 occasions out of 2516 (16%); Stock rose in the next ten days in 211 of these 394 instances (54%)

[3] Returns of 53% or higher over twenty-one-day period on 49 occasions out of 2516 (2%); Stock rose in the next twenty-one days in 10 of these 49 instances (20%)