Why This Bed Bath & Beyond Analyst Is Raising Their Price Target By 60%

Bed Bath & Beyond Inc. BBBY reported last week with strong quarterly revenues, although earnings missed expectations. The retailer also raised its revenue guidance for 2021.

The Bed Bath & Beyond Analyst: Credit Suisse analyst Lavesh Hemnani reiterated a Neutral rating on Bed Bath & Beyond shares and increased the price target from $19 to $30.

The Bed Bath & Beyond Takeaways: There is potential for upside to Bed Bath & Beyond's revised sales guidance, Hemnani said in a note. The company's optimism regarding achieving prior EBIT margin goals despite elevated costs is encouraging, the analyst said.

The revised 2021 revenue guidance is beatable, considering the earlier-than-anticipated launch of owned brands ahead of a key back-to-college season as well as the potential upside from growth in non-core categories as store traffic normalizes through the year, he said.

"We like the transformation path set by the new management, focusing on core categories (that have been outperforming the chain) along with the rollout of owned brands that should help drive more differentiation and market share gains," Hemnani said. 

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These positives appear to be already embedded in the stock, which is up 60% year-to-date, the analyst said. The stock is trading at a premium to its pre-pandemic relative valuation, he said. 

Although a case could be made for further multiple expansion as the company recaptures market share following years of underperformance, sustained signs of this are not yet evident, Hemnani said. 

Credit Suisse raised its earnings per share estimate for fiscal year 2021 from $1.34 to $1.48 and from $1.85 to $2.13 in 2022.  

The firm's EBITDA estimates for the corresponding periods were also hiked from $501 million to $526 million and from $571 million to $590 million. 

BBBY Price Action: The stock was up 2.39% at $29.13 at last check Friday. 

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