BBBY Stock Eyes Worst Day in Months After Earnings Flop

Meanwhile, BBBY put options are flying off the shelves

Deputy Editor
Jul 11, 2019 at 10:36 AM
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Retailer Bed Bath & Beyond Inc. (NASDAQ:BBBY) is struggling this morning, after unveiling fiscal first-quarter revenue and comparable-store sales that missed analysts' mark. The home goods peddler did report better-than-expected per-share earnings, but warned that full-year profits will come in at the lower end of previous guidance. As such, BBBY is down 6.9% at $10.72 -- just off a new 20-year low of $10.43 -- and is garnering attention from both analysts and options traders. 

So far, Jefferies and Citigroup cut their target prices to $13, and J.P. Morgan Securities slashed its target to $13.50 from $20. Currently, the consensus 12-month price target of $15.29 still stands at a 42% premium to BBBY's price. However, sentiment surrounding BBBY wasn't overly optimistic in the first place. Ahead of earnings, 16 of the 18 analysts in coverage called the stock a "hold" or worse, while only two say "buy."

This isn't surprising considering the steep descent the security has made from its seven-month peak at $19.57 in mid-April, pressured by its 10-day and 20-day moving averages. In fact, the stock just came off its worst quarter in at least 20 years, down 31.6% by the end of June. Now, BBBY stock is trading right below the briefly supportive $11 region, as well as its year-to-date breakeven, set for its worst session since April. 

In the options pits, bears have been piling on their pessimistic positions. BBBY's 50-day put/call volume ratio of 1.53 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits in the 82nd percentile of its annual range. This suggests that traders picked up puts over calls at a quicker clip than usual during the past 10 weeks. 

This bearish sentiment is being echoed in today's trading, with 52,000 puts across the tape already -- 22 times what's typically seen at this point. Most active is the August 10 put, with most contracts likely being bought. Traders initiating new positions are expecting even more downside for BBBY by the time the contract expires in mid-August. In addition, it looks like one speculator may have cashed in 10,000 now in-the-money July 12 puts, and rolled them down to the November 11 put.

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