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.
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.
“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.