Bed Bath stock continues is ascent, but analysts from Baird and Wedbush gave up their bullish stances on shares of the home-furnishings company.
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Another day, another pair of downgrades for Bed Bath & Beyond stock, and shares continue to soar.
Bed Bath (ticker: BBBY) stock is up 16.4% to $42.90 in early trading, despite analysts from Baird and Wedbush giving up their bullish stances on the stock. That marks four downgrades in 48 hours for the home-goods retailer, one of the poster children for highly shorted stocks that have been pushed to new heights.
Baird analyst Peter Benedict cut his rating on Bed Bath stock to Neutral from Outperform, as well as removing it from his ‘Fresh Pick’ list, citing the recent short squeeze, while raising his price target to $37 from $30.
He writes that he is still bullish about the company’s new management and its ability to execute a successful transformation of the company. Yet with short bets backfiring—sending the shares to dizzying heights—“non-fundamental market dynamics are controlling the tape,” and Bed Bath is already reflecting a lot of the good news he thinks it can deliver.
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Benedict remains optimistic that its turnaround will ultimately be successful, although not necessarily linear; therefore, given the shares’ rally, he thinks it’s “prudent to take some chips off the table and look to reengage as market conditions warrant.”
Elsewhere, Wedbush’s Seth Basham cut his rating on Bed Bath to Neutral from Outperform, and removed it from the firm’s Best Ideas list. He cites “an extraordinary two days of trading for Bed Bath (and other names with high levels of short interest),” that’s left the shares up more than 100% since the start of the year.
He, too, believes that the company is making real progress with recent initiatives, but the huge jump in price makes him unwilling to recommend chasing Bed Bath, as the “stock’s valuation [has gotten] ahead of itself at this moment.”
Bed Bath is just one of many highly shorted stocks that have soared. As these stocks rise, bears rush in to limit their losses, pushing the shares ever higher. Meanwhile others turn to options to bolster their bets.
Write to Teresa Rivas at [email protected]
