Morgan Stanley on Bed Bath & Beyond; Unattractive

In a research note released Monday, Morgan Stanley analyst Simeon Gutman initiated coverage on Bed Bath & Beyond BBBY with an Underweight rating and a price target of 63.0. The analyst sees margin pressure on the company's omni-channel transition unfolds. In addition an under-leveraged balance sheet protects downside. The analyst is forecasting growth of 7.2 percent in 2015, which is approximately two percent below the Street. The analyst continued by pointing out that the stock is down 24 percent year-to-date on pressures related to margin and slowing earnings growth, and even though the stock has declined the analyst still believes that potential reward is “unattractive.” Also, the analyst expects to see BBBY report margins of 12.9 percent in 2015, which is lower than the Street's estimate. In addition, the analyst sees little room for growth margin expansion primarily due to free shipping and price investments. Furthermore, the company's strong expense control leaves fewer SG&A leverage opportunities. Shares of the company are up 0.52 percent today and are down 24 percent year-to-date.