Although the wild environment of the meme-stock ecosystem seemingly suggests that up is down and down is up, for embattled household goods retailer Bed Bath & Beyond (BBBY), bad news is just that – bad news. If anything, BBBY stock could be headed for even greater pain. Therefore, outside of an extremely risky short trade, the company offers hardly any opportunity for profitability.
From surface level to the granular details, BBBY stock appears only to be delaying an inevitable demise. For example, the Barchart Technical Opinion indicator suggests that BBBY represents a 100% sell. About the only positive implication here is that because shares sit in highly oversold territory, a trend reversal is possible. Unfortunately, such dynamics are difficult to predict.
Also, BBBY stock suffers from a 60-month beta of 1.52. In contrast, a beta of 1 indicates volatility on par with the benchmark equities index. Here, what saves shares from printing an even uglier beta is that it had some good runs following the doldrums of the spring season of 2020. However, in the trailing one-year period, the stock gave up more than 98% of equity value.
Even more startling, Bed Bath & Beyond announced the launch of a new vendor consignment program with ReStore Capital, a credit-focused investment manager providing creative financing solutions in the consumer, retail, commercial, wholesale and manufacturing industries. Essentially, the retailer received a $120 million lifeline to shore up its inventory levels.
On paper, this deal should be incredibly beneficial for BBBY stock. Previously, the company was unable to improve its inventory situation after relationships with its vendors soured, per a CNBC report. However, investors likely viewed the deal as a desperation move. With troubling economic circumstances on the horizon, Bed Bath & Beyond seems too risky for most market participants.
BBBY Stock Can’t Catch a Break
Taking aside all other context, that Bed Bath & Beyond found any enterprise willing to provide it financial support should be considered an encouraging development. Nevertheless, investors probably don’t want to take the bait because we may be dealing with a classic case of too little, too late.
Yes, the company suffers from an inability to stock its shelves with products – a deathblow for a brick-and-mortar retailer. However, with the soured relations with its vendors, Bed Bath & Beyond can’t acquire goods from manufacturers on credit. Obviously, these suppliers fear that BBBY stock will eventually implode. If so, they will become unsecured creditors.
Naturally, the major headwind for BBBY stock is that the underlying enterprise’s well-capitalized competitors don’t suffer this problem. However, another concern centers on the ongoing banking sector fallout. Essentially, the whole country got a quick lesson in the risks associated with catastrophic loss. Therefore, corporate entities are less likely to do business with a beleaguered firm like Bed Bath & Beyond, which flirts with disaster.
Adding to the storm clouds, last week, the retailer announced that it filed a prospectus supplement with the U.S. Securities and Exchange Commission (SEC) regarding the possibility of offering and selling up to $300 million worth of its common stock. If this initiative fails, Bed Bath & Beyond could be headed toward bankruptcy.
Moreover, no compelling reason exists to shop at the retailer. For starters, it’s not as if consumers can’t find equivalent or similar products at other stores. Plus, with the Federal Reserve battling stubbornly high inflation, home goods-related purchases may be limited in number. If so, this dynamic could impose a headwind for BBBY stock.
Analysts See Little Reason for Hope
Finally, Wall Street analysts see little reason to risk exposure to BBBY stock. Right now, market experts peg Bed Bath & Beyond as a consensus moderate sell. This breaks down to two holds, one moderate sell and six strong sells. Tellingly, not one analyst in the past three months issued a buy recommendation.
From TipRanks, among analysts covering BBBY stock within the past 90 days, the retailer features a rare unanimous strong sell assessment. Six experts still cover BBBY and all six pegged it a sell. While this might attract extreme contrarians, the writing seems to be on the wall. If you decide to buy shares, you’re going to have to navigate the shark-infested waters alone.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
