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Why Bed Bath & Beyond Shares Jumped on Friday

By Anders Bylund – Updated Oct 2, 2020 at 1:31PM

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Analysts continued to fawn over Thursday's strong earnings report and the retailer also struck up a fresh same-day shipping partnership.

What happened

Shares of domestic merchandise retailer Bed Bath & Beyond (BBBY 1.70%) rose as much as 11.5% higher on Friday morning before settling down to a milder 9% gain by 12:30 p.m. EDT. The jump built on Thursday's earnings-based double-digit gain, creating a 37% increase in less than two days.

So what

Bed Bath & Beyond saw second-quarter sales fall 1% year over year to $2.69 billion while adjusted earnings rose 47% to $0.50 per share. Your average Wall Street analyst would have settled for a net loss of $0.32 per share on revenue near $2.56 billion.

Some of Friday's continued rise rested on the earnings report as several analyst firms published their analyses in the early morning. Price targets moved uniformly upward as bulls continued to be bullish and bears stayed bearish. Both Loop Capital and J.P. Morgan doubled their target prices for the stock but held on to their neutral ratings. Wedbush maintained its outperform rating and raised the price target from $18 to $25 per share. Wedbush analyst Seth Basham argued that Bed Bath & Beyond executed well in the difficult back-to-school season and the improved marketing effort should drive solid sales in the next quarter as well.

On top of the analyst reactions, Bed Bath & Beyond also announced a same-day shipping partnership with Target subsidiary Shipt. Shoppers can place orders through the Shipt app or in Bed Bath & Beyond's own online shopping tools. The same-day delivery is free to Shipt subscribers on orders of at least $35. Non-members can pay a flat rate of $5 with a minimum order size of $39.

A young woman carries several shopping bags as she smiles

Image source: Getty Images.

Now what

The Shipt deal is tailor-made for the current market environment, combining no-contact online shopping with the instant gratification of same-day delivery. It's arguably good news for Target as well, though the Minnesota-based retailer's stock barely moved on the news. Target is shopping Shipt services around to retail peers with gusto these days.

Bed Bath & Beyond has roared back to life after a difficult spring. Today's rosy analyst reports simply underscored that trend. Its stock price has now soared 500% above the abysmal lows of March.

Anders Bylund 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
$3.60 (1.70%) $0.06
Target Stock Quote
$164.16 (-0.53%) $0.87

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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