Bed Bath & Beyond shares crashed 45% after the bell: explore why

Shares of Bed Bath & Beyond Inc (NASDAQ: BBBY) crashed nearly 45% in extended trading on Thursday after Ryan Cohen sold his entire stake in the struggling retailer.  

Bed Bath & Beyond shares could sink to $5.0

That encouraged a Wedbush Securities analyst to downgrade the stock to “underperform”. Seth Basham sees downside to $5.0 a share now that the activist investor has pulled out of “BBBY”. In a note to clients, he added:

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More pressing is Bed Bath & Beyond’s cash burn and the prospects for further financing needed to shore up its balance sheet and rebuild supplier confidence.

On August 17^th, the stock was up 300% for the month as Wall Street Bets returned to the chain of domestic merchandise retail stores, especially after RC Ventures was reported to have bought call options betting it will go up to $80.

As of Thursday, however, Cohen’s venture capital firm has sold both shares and calls on Bed Bath & Beyond.

Valuation is disconnected from fundamentals

A day earlier, the retailer said it’s committed to maximizing value for its shareholders. To that end, it’s cutting costs, making strategic changes and working to boost its liquidity.

None of it, however, is sufficient to help Bed Bath & Beyond shares, as per the Wedbush analyst.

With current valuation disconnected from the fundamentals, even if BBBY manages to make progress against its operational goals, we see the current risk/reward as disproportionately skewed to the downside.

In its latest reported quarter, Bed Bath & Beyond was significantly below the Street estimates.