Bed Bath & Beyond (BBBY) - Get Report shares rose Friday, after Bank of America analyst Curtis Nagle raised his price target for the home-goods retailer to $14.50 from $12.50 and affirmed his buy rating, citing strength in its BuyBuy Baby division.
That unit is a chain of 135 stores selling clothing, strollers and other items for youngsters.
BuyBuy Baby may be Bed Bath & Beyond’s most valuable division, Nagle said in a commentary cited by CNBC. He calculated that BuyBuy Baby’s enterprise value has reached almost the entire value of Bed Bath & Beyond.
The division doesn’t get its due from investors because of a “nearly complete lack of disclosure” that has made it difficult to analyze the business, Nagle said, according to Bloomberg.
BuyBuy Baby sales are running at a pace of at least $1.2 billion, he said. And it’s producing a 9% Ebitda margin, which is well above the company average.
The brand represents the only one that has grown over the past five years for Bed Bath & Beyond, Nagle said, according to Bloomberg.
BuyBuy Baby can “easily” grow by mid-single digits for the next five years with new leadership.
BuyBuy Baby’s e-commerce business is strong, too, boosted by the coronavirus pandemic and the general consumer shift to online shopping, he said.
On Monday parent Bed Bath said that it had secured $850 million in financing and that nearly all its stores would be open next month.
The company’s stock recently traded at $10, up 5.5%. It has soared 81% over the past three months and dropped 86% over the past five years.