Why BofA Is Bullish On Reddit Stock Bed, Bath & Beyond

Now that the Reddit WallStreetBets trading volatility is once again dying down, one Wall Street analyst upgraded a popular retail investor stock Thursday and said the company’s fundamentals justify a higher share price.

The Bed, Bath & Beyond Analyst: Bank of America analyst Curtis Nagle has reinstated coverage of Bed, Bath & Beyond with a Buy rating and $38 price target.

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The Bed, Bath & Beyond Takeaways: On Thursday, Nagle said Bed, Bath & Beyond shares are once again trading on company fundamentals, and he has a bullish outlook for the stock.

Earlier this month, Bed, Bath & Beyond, which is one of the most heavily shorted stocks in the market relative to its float, soared from under $28 to as high as $44.51 on heavy volume as Redditor’s orchestrated targeted buying campaigns to trigger short squeezes in a handful of stocks.

Yet Bed, Bath & Beyond’s share price has since pulled back to around $30, and Nagle said investors can once again focus on the company’s improving outlook.

“We still believe BBBY is on track to achieve a targeted $850-1,000mn in EBITDA by 2023,” the analyst said. 

In the meantime, Nagle said the company has a strong balance sheet, which includes $1.35 billion in cash and a negative net debt of $200 million, which he said could be used to fund the company’s three-year, $1 billion buyback plan.

After Bed, Bath & Beyond reported a $1.01 EPS loss in fiscal 2021 thanks to the pandemic, Nagle is projecting $1.71 in fiscal 2022 EPS and $5.20 in fiscal 2024 EPS.

Benzinga’s Take: Unlike many of the other meme stocks that have terrible fundamentals, Bed, Bath & Beyond is trading at just 17.8 times Nagle’s fiscal 2021 EPS estimate, making it a compelling potential value play for such a heavily shorted stock.

Bed, Bath & Beyond still has an extremely high short percent of float of 31.7%, according to Finviz.

Photo: Anthony92931 via Wikimedia.