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Is Jefferies the Only Pro-Meme Stocks Firm on Wall Street?

Jefferies is the only Wall Street firm that has price targets on Bed Bath & Beyond and GameStop in line with their current share prices.
  • Jefferies analyst Jonathan Matuszewski has a price target on Bed Bath & Beyond stock at $9 and GameStop at $27.5 per share.
  • Matuszewski is optimistic about Bed Bath & Beyond's latest turnaround plan.
  • Jefferies analysts are going against the Wall Street consensus with neutral ratings on these meme stocks.
Figure 1: Is Jefferies the Only Pro-Meme Stocks Firm on Wall Street?

Figure 1: Is Jefferies the Only Pro-Meme Stocks Firm on Wall Street?

(Read more from Wall Street Memes: “Big Short” Michael Burry Says SPY’s Downturn Has Not Reached Its Bottom Yet)

Jefferies' Bullish View on Bed Bath & Beyond

Two weeks ago, Jefferies analyst Jonathan Matuszewski went against the Wall Street grain by raising his price target for Bed Bath & Beyond's  (BBBY) - Get Bed Bath & Beyond Inc. Report stock.

Matuszewski lifted his price target on the home-goods retailer from $5 to $9, although he still maintained a neutral rating on BBBY.

The reasons for the bullish price target increase were related to hopes that Bed Bath & Beyond's current turnaround plan will be conducted differently than previous, unsuccessful plans.

Matuszewski pointed out that, this time, Bed Bath & Beyond promises to give greater recognition to exclusive products and to improve its customer loyalty program.

However, the analyst pointed out that there are risks in the execution of Bed Bath's plans.

The analysts' price target is double the consensus price target from the 15 recent Wall Street analysts on Bed Bath & Beyondm according to TipRanks.

And a Reuters article pointed out a curious fact: The price target increase came on the same day that Jefferies' investment banking unit conducted the sale of 12 million shares of Bed Bath & Beyond.

Here's what it says in the prospectus issued by Bed Bath & Beyond: 

"We have entered into an Open Market Sale Agreement with Jefferies LLC, dated August 31, 2022, relating to the sale of shares of our common stock, $0.01 par value per share, offered by this prospectus supplement and the accompanying prospectus. In accordance with the terms of the sales agreement, we may offer and sell from time to time up to an aggregate of 12,000,000 shares of our common stock through Jefferies, acting as our sales agent.”

Also, the same release stated that Jefferies may be entitled to a commission of up to 3% of the gross proceeds from the sale of the BBBY shares: "Jefferies will be entitled under the terms of the sales agreement at a commission rate of up to 3.0% of the aggregate gross proceeds of any shares of common stock sold under the sales agreement."

However, Reuters wrote, “Brokerages typically have a strict separation between equity analysts covering companies and investment bankers working for them.” There's no hint of any connection between Jefferies’ price target and the stock sale.

Jefferies' Bullish View on GameStop

Jefferies also has a bullish price target on GameStop. Considering GameStop’s trajectory as a meme stock, most Wall Street analysts have abandoned their coverage of the video game retailer.

Over the past three months, only two analysts have provided price targets for GameStop: Michael Pachter from Wedbush and Stephanie Wissink from Jefferies.

While the Wedbush analyst has a sell recommendation with a $6 price target on GameStop, a few months ago, the Jefferies analyst revealed a neutral stance on GameStop, with a $27.50-per-share price target — in line with current price levels.

According to Stephanie Wissink, her price target is justified by GameStop's shift toward digital platforms and infrastructure, backed up by robust customer relationship management, unlocking new value strands for the company's e-commerce business beyond its retail peers.

As with Bed Bath & Beyond, Jefferies' investment banking unit was also the sales agent responsible for GameStop's "at-the-market" offering program in 2021, which sold 5,000,000 shares of the company's common stock.

However, as stated in a company filing, the commission at the time was 1.5%. Considering that GameStop raised about $1.13 billion from the sale of its stock, this would have yielded about $16.9 million for Jefferies:

"The company will pay the sales agent a commission for its services in acting as agent in the sale of common shares. The sales agent will be entitled to compensation in an amount up to 1.5% of the gross sales price of all of the common shares sold through it under the sale agreement."

The Bottom Line

Jefferies clearly has a different view than other Wall Street firms when it comes to these two meme stocks.

It is not uncommon for equity research to be bullish when investment banking has done work for a company under coverage. However, investment bankers and equity research analysts tend to have processes in place to steer clear of conflicts of interest.

There is no evidence that anything out of place has occurred specifically in the case of Jefferies and these two meme stocks.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)