Home retailer Bed Bath & Beyond Inc. (NASDAQ:BBBY) got a sharp downgrade from KeyBanc today, with the new price target of $24 representing a 32% downside from its share value at market open. KeyBanc also dropped the company from sector weight to underweight, though it explains these changes aren't because of executive or strategic failings but result from factors largely outside the retailer's control, MarketWatch reports.

One of these factors causing Bed Bath & Beyond to be currently overvalued, according to KeyBanc, is the massive boost to GameStop (NYSE:GME) shares caused by WallStreetBets redditors buying up huge quantities of the stock. Other companies have been caught up in the short squeeze, including Bed Bath & Beyond, which also has considerable short interest.

The end of the "nesting" trend exemplified by an African weaverbird leaving its nest.

Image source: Getty Images.

The other major factor in play, as noted by KeyBanc analyst Bradley Thomas, is that "nesting" is likely to decline soon, with people spending less on their homes and home improvements as COVID-19 lockdowns recede and demand for outside-the-home activities sees a resurgence. The Fly reports Thomas expects purchases of "things" to fall off as people turn toward "experiences" as a target for their spending.

While noting the short-squeeze phenomenon and "nesting" are responsible for the stock market likely assigning a lot of excess value to Bed Bath & Beyond, KeyBanc is also careful to indicate its downgrade doesn't mean the company is poorly operated. The research note states "we think highly of CEO Mark Tritton and his team and their turnaround plan" but that "with the stock up 96% YTD we believe the valuation sets too high a bar to clear at 25x 2021 EPS."

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