Bed Bath & Beyond Shares Get $0 Price Target From Analyst After 'Last Gasp' Effort To Avoid Bankruptcy

Zinger Key Points
  • Shares of Bed Bath & Beyond were up Monday before an offering announcement dented momentum.
  • An analyst sees the additional funding for the company as a last ditch effort.

An analyst is sharing updated comments on struggling retailer Bed Bath & Beyond Inc BBBY, which included a price target that fans of the stock won’t be pleased about.

The Bed Bath & Beyond Analyst: Wedbush analyst Seth Basham had an Underperform rating and lowered the price target from $1 to $0.

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The Analyst Takeaways: Shares of Bed Bath & Beyond rocketed higher on Monday only to fall in the after-hours trading session after the company announced a preferred share offering.

“BBBY proposed a series of moves to generate additional liquidity, satisfy its defaulted loans/missed interest payments, and, most importantly, buy it more time,” Basham said. “Unfortunately, we see a low probability that the company will be able to raise equity and view this as a ‘last gasp’ before filing for bankruptcy protection."

The offering could raise proceeds of $225 million and up to $800 million from future installments involving the exercising of warrants to purchase Series A preferred shares. New loans of $100 million along with the offering take the total amount that Bed Bath & Beyond could raise to around $1.1 billion.

“If successful, this series of transactions would buy the company more time. However, FCF was a whopping $403 million in F3Q while cash-on-hand stood at just $153 million at the end of the period.”

The analyst said closing 141 stores could help some of the “bleeding” of the company along with other cost cuts made.

“Comps will need to stabilize and vendors will need to have clarity on liquidity for the company to survive.”

The analyst said the funding could provide a “few more quarters of room” for operations to turn around before bankruptcy.

“Moreover, the weak macro backdrop and high execution risk of BBBY’s inventory, assortment, customer re-engagement, and cost savings initiatives under an interim new management team further reduces the probability of success.”

BBBY Price Action: Bed Bath & Beyond shares were down 48.63% to $3.01 at market close on Tuesday versus a 52-week range of $1.27 to $30.06. 

Read Next: Here's How Much Ryan Cohen Made From His Bed Bath & Beyond Stock Sales 

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