Wedbush Remains Neutral On Bed Bath & Beyond Following Share Repurchase Program


In a research report published yesterday, Wedbush analyst Seth Basham reaffirmed a Neutral rating on Bed Bath & Beyond (BBBY) with a $62 price target in light of BBBY’s announcement of its plans to repurchase $1.1B of its own shares.

Basham wrote, “We look favorably on this action and raise our EPS estimates accordingly, but note limited room for additional leverage beyond this. The accelerated buyback points to the company’s confidence in its long-term outlook and also may serve to limit activist involvement incentive that we have seen in another strong cash flow and low valuation hardline retailer, PETM. After all, we see little more for an activist to push for beyond a leveraged buyback, as we explore in this note. Coupled with our relatively cautious macro view and little visibility that BBBY’s omnichannel and promotion investments will significantly improve trends in the near-term”.

Basham continued, “Despite recent sales volatility and margin pressure, we continue to admire Bed Bath & Beyond’s long-standing decentralized merchandising acumen that keeps customers coming back for core home goods and impulse buys. As the World Market assortment continues to roll into Bed Bath stores, there will be more reason for frequent visits besides 20% off coupons. At the same time, BBBY is tackling online competition head-on, with substantial investments in its omnichannel infrastructure that should help it level the playing field somewhat. All of that said, there is little visibility that these changes will significantly improve trends in the near-term. Furthermore, BBBY’s core business is still highly influenced by housing market trends”.

According to TipRanks.com, which measures analysts and bloggers success rate based on how their calls perform, analyst Set Basham currently has a one-year average return of 11.4% and a 90% success rate. Basham is ranked #1142 out of 3215 analysts.

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