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Bed Bath & Beyond Stock Off; Morgan Stanley Sees Sector Lagging

Bed Bath & Beyond falls as Morgan Stanley says the home-furnishings category could decline in both 2022 and 2023.

Bed Bath & Beyond  (BBBY) - Get Bed Bath & Beyond Inc. Report stock slipped on Thursday after Morgan Stanley analysts downgraded the home-goods retailer to underweight from equal weight and slashed their price target to $12 from $18.

Shares of the Union, N.J., company at last check were down 1.7% at $14.19.

Analyst Simeon Gutman said in a research note that the home-furnishings category could decline in both 2022 and 2023, according to the Fly.

This "could be compounded by share loss" in line with Bed Bath & Beyond's history, Gutman said. 

As such, he now expects the retailer to post below-consensus revenue in each of the next two years. Gutman sees "valuation downside in a negative [comparison] backdrop."

Last month, Bed Bath & Beyond posted weaker-than-expected second-quarter earnings and slashed its full-year profit outlook. That was due to steeper cost inflation and a significant slowdown in store traffic.

Chief Executive Mark Tritton cited Covid-19 fears reemerging amid the delta variant. He also cited "unprecedented supply-chain challenges" and steeper inflation.

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On Monday, Loop Capital analyst Anthony Chukumba lowered his price target on Bed Bath & Beyond to $14 from $18 and affirmed a hold rating on the shares.

He noted the widening price gap between the company's products and the same SKUs. or stock keeping units, sold on Amazon  (AMZN) - Get Amazon.com, Inc. Report. The Bed Bath price gap grew to 6% from 3.3% in the prior quarter. 

Chukumba added that he was becoming "increasingly skeptical" of the company's revised fiscal 2021 earnings guidance, which indicated a significant sequential trend improvement in the fourth quarter. 

Chukumba had recently cut his price target to $18 from $31.

Earlier this month, Bank of America analyst Jason Haas restarted coverage of Bed Bath & Beyond with an underperform rating and $14 price target. 

Haas said that the company was in the midst of a turnaround orchestrated by activist investors who installed Tritton as CEO. 

But he said its comparisons continued to "meaningfully lag" the industry even as it made progress in adding more fulfillment options and selling noncore assets.