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Why Bed Bath & Beyond Stock Just Popped 5%

By Rich Smith – Sep 10, 2020 at 11:16AM

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Bed Bath & Beyond is losing money today -- but just wait two to three years, says Wedbush.

What happened

Shares of home goods retailer Bed Bath & Beyond (BBBY 4.12%) surged in early trading on the Nasdaq, rising more than 10% before retracing a bit as the day wore on. As of 10:55 a.m. EDT, Bed Bath & Beyond is still hanging onto a respectable 5.2% gain.

And if you own stock, you can thank the friendly analysts at Wedbush for that.

Block letters read PLAN 2023

Image source: Getty Images.

So what

This morning, bright and early, Wedbush added buy-rated Bed Beth & Beyond to its "Best Ideas List" -- and raised its price target on the stock to $18 as well.

"BBBY shares continue to trade at distressed levels," wrote Wedbush in a note covered on StreetInsider.com -- just 10 times forward earnings. And yet, argues the analyst, Bed Bath & Beyond has been "turning the corner to positive comps in recent months and [is] on the cusp of a dramatic improvement in profitability."

Now what

It's when precisely, Bed Bath & Beyond will turn said corner that is the question.

This struggling retailer suffered a 49% decline in sales last quarter, and has been losing money for two years running. It lost more than $300 million last quarter alone, yet Wedbush's bull case appears to hinge upon a promise that the company can "generate at least $700m of EBITDA in two-to-three years."

Suffice it to say that two to three years may be a long time for investors to have to wait for an unprofitable company to prove itself capable of earning a profit. Wedbush laments that "many do not believe in this potential transformation."

But I'm inclined to agree with the many on this one.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Bed Bath & Beyond Stock Quote
Bed Bath & Beyond
BBBY
$3.54 (4.12%) $0.14

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