Topline
Despite analyst warnings about “unrealistic” valuations, shares of Bed Bath & Beyond surged up to 70% on Tuesday as retail investors from Reddit’s WallStreetBets piled into the stock after being encouraged by yet another big purchase from activist investor and GameStop chairman, Ryan Cohen.
Key Facts
Bed Bath & Beyond’s stock surged by as much as 70% during trading on Tuesday before paring back gains somewhat, still finishing the day more than 29% higher to trade at nearly $21 per share.
The stock was halted several times for volatility amid record trading volumes, which reached as much as 188 million shares before noon EST (the company only has roughly 80 million shares outstanding).
Bed Bath & Beyond’s stock got a massive boost thanks to an army of retail investors on social media sites like Reddit who snapped up shares: The ticker BBBY was the most popular mention in the WallStreetBets chat room on Tuesday, according to data provider Quiver Quantitative.
Meme stock traders drove up the share price yet again following news that GameStop chairman Ryan Cohen, who owns a more than 10% stake in Bed Bath & Beyond, purchased call options on more than 1.6 million shares.
Retail investors interpreted the move as a vote of confidence, since the strike prices on Cohen’s call options range between $60 and $80—meaning that he is essentially betting that Bed Bath & Beyond’s stock can rise to those levels.
Shares have surged more than 80% in the last three days alone, even amid fresh warnings about the company’s business prospects from Wall Street analysts, the majority of which maintain a “sell” rating on the stock, according to FactSet data.
What To Watch For:
Bed Bath & Beyond’s stock rally on Tuesday came even as yet another analyst turned bearish, with a price target of just $5 per share implying over 75% downside from current price levels. The stock has “recently gained the attention of retail traders in the Wall Street Bets Reddit forum again, which gained notoriety during the GameStop saga back in January 2021,” B. Riley Financial analyst Susan Anderson wrote in a note to clients. She insists that the stock continues to trade at “unrealistic valuations,” though the recent rally could provide the company with a “long-term lifeline” if it raises money from stock sales similar to other meme stocks like GameStop and AMC.
Key Background:
Activist investor Ryan Cohen first revealed a roughly 10% stake in the company back in March. After he pushed for change at the company and a turnaround in the business, Bed Bath & Beyond CEO Mark Tritton was replaced in late June following yet another batch of bad financial results. Boosted by retail investors despite an absence of good news, the company’s stock has jumped 41% so far this year, compared to a 19% loss for the SPDR S&P Retail ETF and a 10% loss for the broader S&P 500 index.
Further Reading:
Bed Bath & Beyond Surges Nearly 40% As Retail Traders Pile Back Into Meme Stocks (Forbes)
Bed Bath & Beyond Stock Jumps Over 20% After New CEO Buys 50,000 Shares (Forbes)
Meme Stocks Surge Despite Market Selloff: GameStop Trading Halted, AMC Jumps (Forbes)