Can Bath & Body Works Bounce Back From Its Recent Dip?

Year-to-date, BBWI has shed more than 25%

Feb 22, 2022 at 12:46 PM

BBWI

Bath & Body Works Inc (NYSE:BBWI) is down 0.4% to trade at $52.06 at last check, ahead of its fourth-quarter earnings call, which is due out after the close tomorrow, Feb. 23. Below, we will explore the stock's technical setup, as well as some of its previous post-earnings activity.

Digging deeper, the equity has pulled back dramatically from its Nov. 18, all-time high of $82. Shares have been testing a familiar floor at the $52 level over the last few sessions, while the 40-day moving average has been pressuring BBWI lower since mid-December. Year-over-year, Bath & Body Works stock maintains a 27.1% year-over-year lead, but is 25.3% lower in 2022.

BBWI 40 Day

The security's last two post-earnings reactions have been positive. In fact, BBWI settled each next-day session higher, including a 10.5% pop back in August. Options traders are pricing in a 7.8% swing for the equity this time around, which is considerably smaller than the 13.4% move it averaged following its last eight reports, regardless of direction.

Analysts are fiercely optimistic towards Bath & Body Works stock, with 16 of the 18 in question calling it a "buy" or better, while the remaining two gave it a tepid "hold" rating. Plus, the 12-month consensus target price of $87.89 is significant a 68.5% premium to current levels.

From a fundamental point of view, Bath & Body Works has struggled to maintain growth in recent years, experiencing an 11% decline in revenues between 2019 and 2021, and more than a $1 billion decrease in net income for 2019, with $300 million in net losses that year.

Still, the specialty retailer has increased annual revenues and net income 9.6% and 89%, respectively, in the last 12 months. Plus, the company is expected to see a 7.8% jump in earnings, and a 5.5% increase in revenues next year.

BBWI offers an intriguing valuation as well. Bath & Body Works stock trades at a forward price-earnings ratio of 10.83, and a price-sales ratio of 1.12. The company also provides a forward dividend of $0.80, with a dividend yield of 1.53%, making it a solid option for long-term investors.

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