After Baird analyst Justin Kleber suggested investors sell, the latest meme stock frenzy came despite continued liquidity concerns, the Shares of Bed Bath Beyond Inc. fell Tuesday, putting them in danger of their first decline in two weeks.
After its stock BBBY, Baird s Kleber jumped 39.8% on Monday as the Reddit Wall Street BetsReddit Wall Street Bets group appeared to be embracing the stock again and went up 148.0% during a nine day win streak, which was the longest since the 11 day stretch that ended Jan. 18, 2007.
Shares of AMC Entertainment Holdings Inc. and GameStop Corp. GME, also fell Tuesday after long win streaks, as the meme-stock resurgence appeared to take a breather.
See now: Bed Bath Beyond leads rally in meme stocks as Reddit group seems to be jumping back on board.
The recent rally in Bed Bath Beyond's stock BBBY comes even as the retailer continues to wrestle with a struggling liquidity issue and falling revenue. The company ended the quarter with cash and cash equivalents of $107.5 million, compared to $1.097 billion in the same period last year. The company also announced the ouster of Chief Executive Mark Tritton after less than three years at the company's helm.
Baird s Kleber has downgraded Bed Bath Beyond to underperform on Tuesday after being at neutral since January 2021, citing valuation and the company's market share losses.
Kleber wrote a note released early Tuesday that shares have surged 148% since July 27, including 86% the past two trading days. Non-fundamental market participants have driven the frenzied move of 100% of the public float traded on Monday. He kept his stock price target at $4, which implies a 61% downside from current levels.
We estimate that BBBY would need to generate $350 M of Ebitda earnings before interest, taxes, depreciation and amortization by FY 24 E FY 25 E vs. our FY 22 E FY 23 E of - $350 M -- $148 M to justify the stock's current $2.3 B enterprise value, given the current macro sector backdrop, Kleber wrote.
According to the analyst, Bed Bath Beyond's liquidity is increasingly in focus. He wrote that BBBY has burned $825 M in cash over the past five quarters, and we model another $250 M over the next three.
AMC takes aim at a huge debt burden with APE special dividends.
With Kleber's downgrade, more than half of the 19 analysts surveyed by FactSet have sold ratings on Bed Bath Beyond's stock, while only one analyst is bullish and eight are neutral.
AMC shares fell 4.4% in morning trading, after soaring 64.6% during a six-day win streak through Monday. It was the longest win streak since it shot up 55.9% over the eight-day stretch that ended on May 18, 2021 during a meme-stock frenzy.
A special APE dividend, in the form of AMC Preferred Equity Units, will be issued by the movie theater operator last week, which is a form of AMC Preferred Equity Unit that will be traded on the New York Stock Exchange.
The stock of GameStop dropped 8.5% Tuesday after running up 34.0% during a nine-day win streak through Monday. It was consumer electronics retailer's longest stretch of gains since the 10 day streak ended March 28, 2022, in which the stock leapt 142.7%.
The latest exchange data shows that short interest bearish bets in Bed Bath Beyond's stock represented 46.4% of the public float, or shares available to trade, compared to 18.7% for AMC and 23.3% for GameStop.
Bed Bath Beyond shares fell 33.0% this year, compared to the S&P 500 index SPX, which had a decline of 13.3%. AMC shares have declined 15.8% year to date, while GameStop's stock has gained 7.2%.