Bed Bath & Beyond stock should be worth $4 only: Baird

Bed Bath & Beyond Inc (NASDAQ: BBBY) has been on fire over the past couple of weeks, but that “frenzy” is unlikely to last for very long, says Justin Kleber. He’s a Senior Equity Research Analyst at Baird.

Bed Bath & Beyond stock could tank 55% from here

On Tuesday, he downgraded the Bed Bath & Beyond stock to “underperform” and reiterated his price target of $4.0 a share that represents about a 55% downside from here. In a note to clients, Kleber said:

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This frenzied move has been driven by non-fundamentally focused market participants. With market share losses accelerating and BBBY burning cash, fundamental risk/reward looks unattractive.

The meme stock, he added, has to sharply improve its EBITDA to justify its current $2.30 billion enterprise value – but that’s unlikely to happen in this macroeconomic environment.

Versus its year-to-date low, Bed bath & Beyond stock is currently up more than 100%.

Why else does he dislike Bed Bath & Beyond Inc?

In its latest reported quarter, the American chain of domestic merchandise retail stores lost $2.83 a share (adjusted) – more than double the $1.39 that analysts had expected. Kleber is also bearish on the Bed Bath & Beyond stock because:

Supply chain disruptions have exposed BBBY’s antiquated infrastructure and wreaked havoc on the business at the same time the company’s pivot toward owned brands has not resonated with customers.

The retailer will likely remain challenged as demand for home goods continues to normalise following two years of pandemic-driven boost, he concluded.

In June, the Union-headquartered company named Sue Gove its new CEO (interim) tasked with fixing the liquidity concerns. Most recently, Bed Bath & Beyond was reported considering private loans to optimise its balance sheet.