Bed Bath & Beyond stock rises despite concerns about liquidation

Bed Bath & Beyond Inc (NASDAQ:BBBY) stock rose by 25%, beating recent financial analyst warnings concerning its exaggerated evaluation considering the retailer’s shrinking liquidity. The stock surged as retail traders on social media platforms piled into its stock.

This frenzy was encouraged by Ryan Cohen, Gamestop Chairman, after he placed another huge bet on the troubled retailer. The shares shot up over 70% despite several halts because of volatility.

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Business highlights                       

The rise in stock coincided with the company’s modest rally in its debt prices. Additionally, the sharp rise came despite many analyst warnings concerning its dwindling liquidity. The retailer is fighting to keep the confidence of its investors and suppliers after the investment it made in private-label brands that did not resonate well with its existing customers.

The company ended May 2022 with cash of approximately $100 million, after scorching through over $300 million of its reserve cache and borrowing about $200 million from the credit line.

The struggling retailer has been addressing its liquidity concerns in the last 30 days. Bed Bath & Beyond, known for its huge catalogue of home-goods items, is searching for about a $375 million loan that would help build cash and manage existing asset-based debt.

The retailer’s cash burn is forecasted at approximately $200 million in Q2 of the 2022 fiscal year and would rise to around $400 million or so if the company’s vendors decide to lessen the payment terms to 30 days from the current 60 days.

Analyst comments 

Susan Anderson, a B. Riley Securities research analyst said the company’s valuation of $2.2 billion is “unrealistic.”

John Kleber, a Robert W. Baird & Co research analyst, downgraded Bed Bath 7 Beyond to “underperform” claiming the piling moves in its stock has been encouraged by market players who aren’t concentrating on fundamentals. The analyst said turning around the retailer given the current retail and macro sector backdrop will be very hard.