Even as Wall Street stares down the barrel of its fourth red week in a row, there’s one company that’s looking to close out their third straight week of gains. Bed Bath & Beyond (NASDAQ: BBBY) shares have stayed out of the limelight this past summer but have still done some serious work. They’re up a full 300% from March’s lows and look set to hit post-COVID highs today.
It wasn’t always this pretty though. The $2 billion domestic retail store took its fair share of damage back in Q1 as concerns about consumer spending were at their peak. Shares were coming off a 6-month rally in February just before they got smashed and sent back down 80% to trade at 1995 levels in a matter of weeks.
But as the economic recovery has materialized much faster than expected and as consumers have for the most part simply shifted their focus to e-commerce shopping, Bed Bath & Beyond has been able to capitalize on this well.
Pivot to e-Commerce
The first hint that investors had of the company’s pivot towards e-commerce came in late April when management announced that even as some brick and mortar stores were going to remain closed, their digital channel sales were up 85% that month alone. So much so in fact that they announced they were turning some of the stores into fulfillment centers and bringing back in furloughed workers to help with distribution.
Shares popped nearly 30% the next day and this internal momentum no doubt helped them to shrug off their July earnings report which made for grim reading. Despite the positive movement in digital revenue, total revenue was still down close to 50% year on year. This kind of contraction was seen across many retailers however and Wall Street wasn’t afraid to mark it down as a once off and to instead look to the future. It’s worth noting that in the meantime online sales were reported to be up 80% in June and 70% in July which confirmed the continuation of the trend first reported in April.
These new customers who have been buying online are expected to stick around even post COVID and this bodes well for the continued digitalization of most retailer’s plans. Bed Bath & Beyond is no different and they look set to continue capitalizing on the shift to a stay-at-home environment.
On Thursday, the bulls had another reason to be excited as Baird upgraded shares to Outperform from Neutral. They also raised their price target from $13 to $20, implying a 40% move from where shares closed out that session. Baird is particularly bullish on the company’s recent stabilization of sales and believes this clears the way for shares to head for multi-year highs.
It might be a while yet before they’re trading at the $80 mark, last hit in 2014, but they’re not doing too bad for a company that was close to being written off by some earlier this year.
Shares are facing into some fairly solid resistance that forms a downtrend they’ve been unable to break through since 2017. It will be interesting to see what their upcoming earnings report says and if it can confirm the bulls thesis. The numbers will either fuel a breakout or confirm the bears thesis that the company is still a shadow of its former self with a long road ahead.
That being said, there probably hasn’t been a better time in recent years for shares to make a go of it. The irony is that it took a 80% haircut and the coronavirus in order to create the momentum we’re currently seeing.
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6 Stocks Riding the Coattails of Nikola Motor
Since its initial public offering on June 4, shares of Nikola (NASDAQ: NKLA) have surged over 130%. NKLA stock has cooled down since then and is now trading at just over a 60% premium from its IPO price of $34 per share.
Nikola isn’t alone. The entire electric vehicle (EV) market is on a tear. In addition to the surge in Nikola stock, Tesla (NASDAQ: TSLA) stock is up over 93% and Nio (NYSE: NIO) stock has climbed nearly over 160% in the same time period. But while Tesla and Nio are actually producing cars, Nikola does not even have a plant built.
With all that said, the allure of Nikola is easy to see. The company is planning on building a fleet of hydrogen fuel cell trucks powered by hydrogen fueling stations from sea to shining sea. At least that’s the plan. But that plan is years away. The company won’t even have a fuel cell truck available until 2023 at the earliest.
And while the United States has 39 hydrogen fueling stations, it’s an expensive, complicated venture. But that’s been the problem with hydrogen for nearly two decades. And that has some investors wondering what the company’s chief executive officer (CEO) Trevor Milton is really selling.
Leaving aside the question of whether Nikola is riding the coattails of Tesla, Nikola is beginning to create some significant coattails of its own. And there’s a reason for this. While Nikola is planning to compete with Tesla in the electric car arena, it’s also covering a specific niche with a semi-truck that will run on a hydrogen fuel cell.
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