Bed Bath & Beyond Stock Set to Drop on New "Sell" Rating

BBBY stock is trading near a trendline with historically bearish implications

by Karee Venema

Published on Feb 11, 2019 at 9:28 AM
Updated on Feb 11, 2019 at 9:28 AM

Loop Capital downgraded Bed Bath & Beyond Inc. (NASDAQ:BBBY) to "sell" from "hold," and cut its price target to $12 from $13. The brokerage firm called BBBY stock's recent gains "unwarranted," and said the home goods retailer's 2019 fiscal guidance is "unrealistic." Further, Loop Capital noted, "BBBY shareholders are unlikely to be 'bailed out' by a leveraged buyout (LBO) or activist investment."

In reaction, BBBY stock is down 2.7% in electronic trading. Heading into today, the shares were up 47% from their Dec. 24 20-year low of $10.46, and closed Friday at $15.42. However, this rally has the security trading near its 160-day moving average.

Per data from Schaeffer's Senior Quantitative Rocky White, there have been eight times in the last three years BBBY has come within one standard deviation of this trendline after a lengthy stretch below it. This resulted in an average one-month loss of 7.8%, with three-quarters of the returns negative.

The brokerage bunch is already skeptical of Bed Bath & Beyond, with not one of the 14 analysts in coverage maintaining anything higher than a "hold" rating. Plus, the average 12-month price target of $13 is a discount to current trading levels.

Meanwhile, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.61 ranks in the 89th annual percentile, meaning short-term speculators are more put-heavy than usual toward BBBY. The February 10 and 15 puts are home to peak front-month open interest, with nearly 42,000 contracts collectively outstanding.

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