Bed Bath & Beyond Surge Prompts Rating Cut at 2 More Firms

Bed Bath & Beyond is downgraded at two more firms. One analyst says the stock's upward move is 'unsustainable.'
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Bed Bath & Beyond  (BBBY) - Get Report was downgraded at Wedbush and Baird, bringing the number of ratings cuts to at least four this week as analysts react to the home-goods retailer's recent stock-price surge.

Shares of the Union, N.J., retailer at last check were up 22% at $45.13. The stock had about doubled in the 12 trading days through Tuesday.

Trading was briefly halted shortly after the market opened on Wednesday. Trading resumed at 9:41 a.m., according to a posting on the Fly.

In a note entitled "Cashing in Some Chips," Baird analyst Peter Benedict downgraded Bed Bath to neutral from outperform and removed the firm's Fresh Pick designation.

Benedict said in a note to investors that Bed Bath & Beyond shares have leaped 32% in the past four trading sessions, "as several highly shorted stocks have been bid up aggressively by non-fundamentally focused market participants (including Reddit's WallStreetBets)."

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"While our bullish view of [Chief Executive] Mark Tritton's transformation strategy remains unchanged," Benedict said, "non-fundamental market dynamics are controlling the tape, and the significant Ebitda recovery opportunity we envision for the company is becoming increasingly appreciated by the stock."

The analyst, who raised his price target to $37 from $30, said it was "prudent to take some chips off the table and look to reengage as market conditions warrant."

Wedbush analyst Seth Basham cut his rating on the company to neutral from outperform with a price target of $33, up from $27.

His move followed what he called "an extraordinary two days of trading" for the stock and other names with high levels of short interest.

Basham also removed the stock from Wedbush's Best Idea List, saying he still saw "high potential" for transformation at Bed Bath but the sharp move higher is "unsustainable."

"The stock is ahead of itself,” the analyst said. 

On Tuesday, Bed Bath & Beyond received a rare double downgrade from analysts at Raymond James, to market perform from strong buy, while UBS downgraded the company to sell from neutral. 

UBS said that industrywide sales of home goods will face pressure as consumers shift spending to areas like food and away from home and travel.