Hope Springs Eternal for These 2 Beaten-Down Stocks

Wall Street is trying to make this month a January to remember for investors, and the stock market's performance stayed on script on Tuesday. Gains for the S&P 500 (^GSPC -0.60%), Nasdaq Composite (^IXIC -0.91%), and Dow Jones Industrial Average (^DJI -1.10%) came in as much as 1% as market participants took comments from Federal Reserve chair Jerome Powell in stride.

Data source: Yahoo! Finance.

Some of the best performers on the day were stocks that got hammered down in 2022. Even though both Coinbase Global (COIN -0.12%) and Bed Bath & Beyond (BBBY) have faced severe challenges to their business models, shareholders were willing to double down on their potential to generate outsized, long-term returns, and their stocks both posted nice rebounds on Tuesday. Read on to learn more about why Coinbase and Bed Bath & Beyond gained ground and what could lie ahead for both companies.

Coinbase bites the bullet

Shares of Coinbase Global finished up 13% on Tuesday. The industry leader in cryptocurrency exchange services took steps to rein in its spending even as it seeks to take advantage of the turmoil that's hitting the digital asset arena to boost market share.

Coinbase announced early Tuesday that it would lay off about 20% of its remaining workforce. The reductions of about 950 jobs are the third time that Coinbase has resorted to reducing the size of its employee base in order to cut back on expenses and focus more on long-term profitability. As part of a broader restructuring, Coinbase expects to spend between $149 million and $163 million, much of which will come from the acceleration of stock-based compensation arrangements.

The filing with the U.S. Securities and Exchange Commission (SEC) also noted that Coinbase believes that various business metrics for the full 2022 year are likely to be within the ranges it set out in its most recent earnings release in early November.

Even though the cryptocurrency markets remain at depressed levels, investors increasingly believe that Coinbase is best positioned to weather a crypto winter and emerge with higher market share when conditions recover. With the stock still down more than 80% from its highs, Coinbase shareholders are hoping that this could be just the beginning of a longer reversal.

Bed Bath & Beyond stays afloat

Elsewhere, shares of Bed Bath & Beyond jumped 28%. The home goods retailer posted fiscal third-quarter financial results for the period ending Nov. 28 that showed ongoing fiscal challenges but avoided the worst-case scenarios that many shareholders had anticipated.

Bed Bath & Beyond's quarterly financial weren't pretty. Net sales of $1.26 billion were down 33% year over year on a 32% drop in comparable sales. Operating cash outflows amounted to more than $300 million, and Bed Bath & Beyond posted an adjusted loss of $3.65 per share. Just about every aspect of the retailer's business struggled as comparable digital sales were down 33%. Even the relatively strong Buy Buy Baby concept saw comparable-sales percentage declines in the low 20s for the quarter.

Yet investors seemed to take heart that Bed Bath & Beyond is still pursuing all available strategic options to get itself out of its hole. That still might involve a bankruptcy filing, but shareholders are more hopeful that Bed Bath & Beyond might find a buyer willing to take advantage of its real estate lease holdings or some other alternative.

The immediate question for Bed Bath & Beyond is whether it will be able to pay interest on its debt obligations due at the beginning of February. If not, then shareholders could finally have to give up on their hopes for a recovery from the home goods retailer.