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The Ratings Game: Bed Bath & Beyond becomes more attractive with short squeeze over, B. of A. says

Bed Bath & Beyond shares soared during the GameStop frenzy, but were upgraded after falling more than 22% since the beginning of the month. Read More...

Bank of America has upgraded Bed Bath & Beyond Inc. BBBY, +2.03% to buy from neutral now that the recent short squeeze is largely over and shares are pulling back.

Bank of America has lowered its price target to $38 from $55.

Bed Bath & Beyond stock was down 5.4% in Thursday trading and has fallen more than 22% for the month to date.

Bed Bath & Beyond was caught up in the GameStop Inc. GME, +2.54% short squeeze frenzy just a couple of weeks ago, with the stock running up as much as 96% across four days.

See: It isn’t just GameStop: Here are some of the other heavily shorted stocks shooting higher

With the share price in retreat and analysts able to refocus on the health of the business, analysts led by Curtis Nagle say the company has taken a number of steps to set itself up for growth in 2021.

Among those changes are: closing more than 100 underperforming stores with 200 store closures total planned by the end of the year; divestiture of non-core assets, such as Cost Plus World Market; and building out its digital capabilities.

“Bed Bath & Beyond has a slew of growth initiatives and margin boosters in the works that we do not believe are fully appreciated or believed yet,” analysts said.

Store remodels, cost-effective sourcing and more private-label goods are on the way, analysts say.

With former Target Corp. TGT, +0.54% executive Mark Tritton at the helm, Bed Bath & Beyond has laid out a transformation plan over past months. This will help Bed Bath & Beyond gain relevance as well as grow the business, Bank of America says.

“Unlike Gamestop, which experienced a far more extreme share price rise and fall due to short squeezing and high retail enthusiasm, we believe there is a real fundamental turnaround taking shape at Bed Bath & Beyond,” analysts wrote.

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“Competition and reversing share loss over the years will not be easy for Bed Bath & Beyond. However, it does not have to be concerned about its underlying market moving to a place where it simply will not be able to establish a meaningful presence, as is the case with Gamestop as console game distribution shifts to the Xbox and PlayStation digital networks.”

Bed Bath & Beyond shares have rallied 138.8% over the past year, outpacing the S&P 500 index SPX, +0.47%, which is up 16.4% for the period.

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