Bed Bath & Beyond Stock Pops on Morgan Stanley Upgrade

BBBY stock is set for its second straight weekly gain

by Karee Venema

Published on Apr 5, 2019 at 9:57 AM

Morgan Stanley upgraded Bed Bath & Beyond Inc. (NASDAQ:BBBY) to "equal weight" from "underweight," and lifted its price target by $7 to $20 -- a 13.7% premium to last night's close. The brokerage firm said a recent push by activist investors for new management "creates possible upside," and could drive BBBY stock's performance until the retailer's annual shareholders meeting, scheduled for Friday, June. 28.

Today, BBBY stock has shot up 3.8% out of the gate to trade at $18.25, bringing its year-to-date advance to 61%. Since a late-March bull gap was sparked by news that a group of activist investors was seeking leadership changes, the shares appear to have established a newfound floor near $17 -- home to their late-February highs. However, just above the equity's current perch is the $18.81 mark, site of its Sept. 26 pre-bear gap close.

There's still plenty of skepticism priced into the shares ahead of Bed Bath & Beyond's earnings report, slated for release after the market closes next Wednesday, April 10. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 10-day put/call volume ratio of 1.67 ranks in the 86th annual percentile, meaning puts have been bought to open over calls at a quicker-than-usual clip.

This bearish positioning isn't too surprising given Bed Bath & Beyond's dismal history of post-earnings reactions. The shares have closed lower in the session subsequent to earnings in six of the last eight quarters, averaging a loss of 14.2% -- including a 20% plunge this time last year.

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