Home Business Bed Bath and Beyond gets rare buy rating, but 2 traders wouldn’t bite

Bed Bath and Beyond gets rare buy rating, but 2 traders wouldn’t bite

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Bed Bath and Beyond may be beyond reach.

Though the retailer got a rare buy rating this week from B. Riley, which initiated the name with a $44 price target and an optimistic case for its new management and cost-cutting strategies, the stock doesn’t look particularly appealing at its current levels, two traders told CNBC’s “Trading Nation” on Thursday.

The $3.5 billion company’s earnings and revenue growth forecasts may look better than those of its industry peers, but still falls short relative to the broader market, Chantico Global founder and CEO Gina Sanchez said in the Thursday interview.

“It’s really hard to get excited,” she said. “We think that they’re priced about right and this isn’t necessarily a screaming buy.”

Bed Bath and Beyond is already up 78% year to date and trades at a multiple of nearly 20.5 times forward price-to-earnings.

The stock’s history as a Reddit favorite doesn’t do investors any favors, either, 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,” she said. “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.”

One way that could play out has to do with Bed Bath and Beyond’s short interest, Matt Maley, chief market strategist at Miller Tabak, said in the same “Trading Nation” interview.

Both times the stock got swept up in the Reddit trade this year — first when GameStop rallied in January and again when AMC spiked in June — it had notably high short interest, Maley said.

“Now it’s fallen back down. If anything, it’s got an incredibly low short interest, not a high one. So, people have to be very, very careful,” Maley warned. “If we get … another short squeeze, Bed Bath and Beyond is not going to be one of the stocks that’s squeezed like that.”

So while the company’s recovery story may sound promising, its stock will likely need time to reflect it, the strategist said.

“They’ve made some good changes and their earnings have been pretty good, but I just don’t think people should be looking to this one for another rocket-ship ride like we’ve seen two other times this year,” he said.

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