Bed Bath & Beyond (BBBY) Extends Rally After Upgrade

Bed Bath & Beyond Inc. (BBBY) shares rose about 4% during Thursday's session after Baird upgraded the stock to Outperform and raised its price target to $20 per share.

Key Takeaways

  • Bed Bath & Beyond shares moved higher after Baird upgraded the stock to Outperform with a $20.00 price target.
  • The analyst believes that the stock could be a compelling turnaround play following its cost-cutting efforts and an economic rebound.
  • The stock has more room to run on a technical level, but short interest remains high, suggesting some skepticism among investors.

Baird upgraded Bed Bath & Beyond shares and raised its price target, saying that channel checks suggest sales have stabilized following a rough patch. Analyst Peter Benedict is "intrigued" by the company's turnaround potential and sees a material recovery in EBITDA over the next few years. While the stock has 58% short interest, the analyst feels that it's "worth taking a shot" with the retailer's shares.

The move comes amid restructuring and cost-cutting efforts at the corporate level. In August, the retailer said that it would eliminate 2,800 jobs as part of a restructuring plan to cut costs and streamline its operations. The cuts would reduce management layers at both corporate headquarters and retail stores with the goal of delivering $150 million in pretax savings.

Tip

Restructuring is an action taken by a company to significantly modify the financial and operational aspects of the company, usually when the business is facing financial pressures. Restructuring is a type of corporate action taken that involves significantly modifying the debt, operations, or structure of a company as a way of limiting financial harm and improving the business.

Chart showing the share price performance of Bed Bath & Beyond Inc. (BBBY)
TradingView.com

From a technical standpoint, the stock briefly tested fresh highs before giving up some ground later in Thursday's session. The relative strength index (RSI) remains in neutral territory with a reading of 64.17, but the moving average convergence divergence (MACD) recently experienced a bullish crossover. These indicators suggest that the stock could have more room to run before experiencing consolidation.

Traders should watch for a move toward trendline resistance at around $14.30 before experiencing some consolidation within its price channel. Key support levels stand at $12.30, while a breakout could lead to a retest of the 200-day moving average at $10.33. If the stock breaks out, traders could see a move to retest prior highs of around $17.80.

The Bottom Line

Bed Bath & Beyond may have struggled over the past few quarters, but Baird analysts see a potential turnaround. Despite high short interest in the stock, shares have continued to move higher and could see a further move toward trendline resistance before consolidation.

The author holds no position in the stock(s) mentioned except through passively managed index funds.

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