Bed Bath & Beyond (BBBY) Stock Downgraded at Cantor Fitzgerald

Bed Bath & Beyond (BBBY) stock was downgraded to 'hold' from 'buy' at Cantor Fitzgerald on Friday.
By Amanda Albright ,

NEW YORK (TheStreet) -- Bed Bath& Beyond  (BBBY) - Get Report stock was downgraded to "hold" from "buy" at Cantor Fitzgerald on Friday. The firm lowered its price target on the stock to $53 from $77.

The Union, NJ-based company, which sells domestic merchandise, was downgraded because of gross margin declines that have persisted for the last four years, the firm said.

Cantor said Bed Bath & Beyond's use of its 20% off coupons has accelerated from a year ago.

"We expect Bed Bath to continue its heavy level of couponing that have pressured margins throughout this period, and we think greater investments in technology and the distribution network may be needed as e-commerce penetration continues to increase," the firm added. "The retail demand environment has been weaker than we anticipated with the holidays approaching."

Additionally, Cantor analysts lowered their fiscal 2016 earnings estimate for Bed Bath & Beyond to $5.05 from $5.57 due to slower same-store sales.

Bed Bath & Beyond stock closed at $53.81 on Thursday.

Separately, TheStreet Ratings team rates BED BATH & BEYOND INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

We rate BED BATH & BEYOND INC (BBBY) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.6%. Since the same quarter one year prior, revenues slightly increased by 1.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Specialty Retail industry and the overall market, BED BATH & BEYOND INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • The current debt-to-equity ratio, 0.58, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.35 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • Net operating cash flow has decreased to $255.31 million or 30.54% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Specialty Retail industry average, but is greater than that of the S&P 500. The net income has decreased by 9.9% when compared to the same quarter one year ago, dropping from $223.95 million to $201.68 million.
  • You can view the full analysis from the report here: BBBY

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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