Bed Bath & Beyond Gets its 6th Downgrade in Three Days

Bed Bath & Beyond stock took a tumble Thursday, giving back some of the meteoric gains that left shares up 80% year to date.

Bed Bath & Beyond [$BBBY] inherited another pair of downgrades Thursday. Bank of America Merrill Lynch analyst Curtis Nagle slashed his rating on the shares to Neutral from Buy, while raising his price target to $55 from $31, and Telsey Advisory Group’s Joseph Feldman lowered it to Market Perform from Outperform, and upped his target to $40 from $27.

Bank of America’s Nagle notes that Bed Bath has surged sans any “no significant news specific to the company announced or changes in consensus earnings.” While he is still confident about the retailer’s bounce-back, he said that the recent run-up is only being sparked by a short squeeze, rather than fundamental analysis.

Telsey’s Feldman was also apprehensive. Bed Bath’s big run-up has not only topped fundamentals and the multiyear benefits of its turnaround, but also means that the shares, by some metrics, are trading well above both their 10-year average and 10-year peak, he says. “The sudden, sharp surge in Bed Bath & Beyond’s share price and valuation likely has been fueled by a short squeeze, given the high short interest, and speculation by retail investors, fueled in chat rooms, much like GameStop [$GME],” he writes.

Less than two-thirds of Bed Bath’s shares are sold short, making it an easy target for a squeeze in lieu of the rampage of beaten down names continuing their elevation into the stratosphere this week. Short squeezes happen when bears rush to cover their shorts and reverse their bets, sending the shares swiftly higher. That is what’s behind Bed Bath’s recent jump and the more than 1300% year-to-date gain for GameStop.

Nagle and Feldman’s demerits mean that Bed Bath has harvested a half-dozen downgrades in just three days, even as bulls warn that the stock has gotten ahead of itself. The previous downgrades did little to slow the stock’s headway, but today Bed Bath is dipping more than 35% to $34. But that move actually is more likely due to the fact that many online trading platforms are placing restrictions on stocks that have seen major moves lately. See $GME and $AMC.

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