Shares of home goods retailer Bed Bath & Beyond (NASDAQ:BBBY) 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.
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."
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.