|BBB Stock Forecast: The latest addition to the list is Bed Bath & Beyond stock (Nasdaq: BBBY) whose share price has become too volatile to handle as institutional investors and meme traders lock the horns against each other.|
There are popularly two sets of investors, long term investors looking for quality stocks and investing after fundamental and technical analysis and holding the stocks for a horizon of 5-10 years, and then there are meme traders, ardent followers of Reddit platform, holding the capacity to take share price of a particular stock to any upside or downside level, leaving behind all the fundamental and technical analysis of economists and investors.
In last couple of years, we have seen the examples of such frenzy trading and meme stocks like GameStop touching new heights every day, squeezing the big institutions and in turn making some of them bankrupt. AMC Entertainments’ share is one such another stock propelled by meme traders, which went up from $10 to $60 within a month in May and June 2021 and is back to $19 as of 19.08.2022.
The latest addition to the list is Bed Bath & Beyond stock (Nasdaq: BBBY) whose share price has become too volatile to handle as institutional investors and meme traders lock the horns against each other. In this article, we will trace the journey of this meme stock, reasons for its current upward and downward movement and what lies ahead after this tsunami of reddit traders leave the stock?
BBB Stock Forecast: Bed Bath & Beyond- Journey Before 2020
BBBY stock was not targeted as meme stock always. It debuted on Nasdaq index way back in 1982 at a split adjusted price of only $1. It had four splits in its journey till now, all between 1993 and 2000 and all were 2:1. The share price peaked out in December 2013, at price $77 and in February 2015 at price $78, but since then it has been one way journey to the rock bottom and it touched $3.94 in April 2020, due to pandemic fears on businesses across the globe and poor management. It is when, it caught the attention of reddit investors and hence the journey for becoming a meme stock started.
BBB Stock Forecast: Latest Developments for Bed Bath & Beyond Inc
Ryan Cohen Intention to Sell Entire Stake- Recently, activist investor Ryan Cohen, Chairman of GameStop and also co-founder of online pet retailer Chewy showed his intend to sell entire stake in Bed Bath & Beyond. As per Form 144, signed on Tuesday and filed with SEC, ace investor, through his firm RC Ventures proposed to sell 9.45 million shares of the company. RC Ventures holds 7.78 million direct shares of the valuations $119.4 million and also call options which are exercisable into $1.67 million shares. After the announcement came on Wednesday post market hours, stock fell 28% in the post- market trading before next day opening from $26.25 to $18.91. Yesterday, i.e., on 18.08.2022, registered a total loss of more than 19% to close at $18.55. As per SEC filing, Cohen owned nearly 12% of the shares of Bed Bath & Beyond, which he revealed in March 2022.
Frenzy Trading in August- Apart from yesterday’s fall, it has been a fantastic month for BBBY stock as it rallied 300% till Wednesday, August 17th 2022. It included five days of more than 20% gain amid heavy trading volume. For reference, the traded volume was around 6-7 million in July or before, which picked up the craze in August and volume went beyond 100 million on regular basis in August and on Wednesday, nearly 395 million shares exchanged hands. The reason for the frenzy trading is popular Reddit page Wall Street Bets and as per data, Bed Bath & Beyond is the most mentioned stock on the WSB page, with post volume about five times higher than that of GameStop. It is an attempt by the retail investors to take the share price higher for a stock having huge short interest in order to create a squeeze situation and forcing the hedge funds and other institutional players to close their short positions, propelling the share price even further.
Financial position of Bed Bath & Beyond – Keeping aside this meme-based trading, financials have their own value and plays an important role in deciding the future action for any investor. The financial position and balance sheet for the company has not been in good shape since Covid 19 pandemic. Due to pandemic, company announced the closure of more than 200 stores, roughly 21%. From a net positive income of $424.86 million, it reported in 2017, it has dropped to a loss of 559.62 million in 2021. In the recent quarter, it reported a net loss of $358 million, as compared to $51 million loss in the same quarter a year ago. Moreover, the estimated earnings per share for 2022 is expected to be -6.22 per share, a significant downfall from $2.05 in 2018.
BBB Stock Forecast: What Lies Ahead After this Dramatic Fall?
While, it is difficult to guess right now, where will BBBY stock be in next few days or even tomorrow for start. But there are some clues which can not be ignored. In the pre-market on 19th August 2022, the share price is down by more than 41% and is currently trading at $10.92, from previous closing of $18.55. The simple reason for such a downfall is the flash news that a university student Jack Freeman, an applied mathematics and economics major made around $110 million gain after selling Bed Bath & Beyond shares worth $130 million. He reportedly bought the shares in July at $5.50 when company was struggling and it sold all the shares and sold it on Wednesday at a high of $27. It can be said that the student timed the stock very well.
On the other hand, amid the falling price, Reddit users rushed to post that investor Ryan Cohen has only showed it intend to sell the stock and has not executed the deal yet. As per SEC rules, any investor willing to sell such huge stake in the company needs to declare by a filing 90 days before the actual deal. Now, Ryan Cohen can sell the stake after 18th November 2022 in the company. So, there is strong tussle between Reddit users and institutional players which has made the share price very volatile.
The future prospects of Bed Bath &Beyond are very bleak. If we keep this meme-based trading on side-lines, BBBY stock would have become a penny stock by now and probably management would have been thinking about reverse split. A long term investor should ignore this non profitable company as it is only meant for short term gains if you are prudent enough to sail through this volatile moves of the stock.
Note: Crowdwisdom360 collates Predictions and data from all over the net and has no in-house view on the likely trends in the Stocks or Crypto Coins. Please consult a registered investment advisor to guide you on your financial decisions.