Why Wall Street Still Covers Bed Bath & Beyond

The stock of Bed Bath & Beyond dropped drastically again on Tuesday as the rollercoaster ride that has been riding the retailer has reached new lows amid renewed bankruptcy fears and yet another reduction in the price target by analysts. Does this raise the question as to why are we bothering with it at all?

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According to Jonathan Matuszewski, a Jefferies analyst who has a Hold rating on Bed Bath & Beyond stocks (ticker: BBBY), the analyst has cut his target price to 50 cents from $3 on Tuesday, to take into account Bed Bath & Beyond's fourth-quarter outlook, a change that is believed to have killed the shares last week, when the shares fell below $1. During the early hours of Tuesday morning, the company's shares were down 4 cents to 35 cents a share.

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A request for comment on this story was not returned by Bed Bath.

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Considering the retailer's limited funding options, the move might seem more academic than practical at this stage.

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Matuszewski is still very much involved in the stock, however, based on the fact set data, which eight analysts are still covering it, of which at least seven have continued to update their models and price targets during the current year. Understandably, investors might be wondering whether analysts are still keeping an eye on Bed Bath & Beyond, considering the company's penny stock status, given its status.

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It is largely down to the determination of the individual to persevere that the answer can be found.

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The report from Barron's in January stated that many analysts already have abandoned ship when it comes to the stock market. In November of last year, 16 analysts still had price targets of $27 on the stock of the company, which is a significant increase from two years ago when 20 analysts were covering the stock. In recent months, it has dropped to half of that. Many analysts believe the tiny company's market cap and low stock price, along with fears that Bed Bath will become bankrupt, were the reasons they dropped coverage of Bed Bath Beyond.

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Matuszewski is the only bearish analyst out of the eight remainings, and he is one of just two who is watching the stock. In all, three-quarters of the market favors Bed Bath & Beyond. He only updated his model in a perfunctory manner on Tuesday, failing to go much beyond the basics.

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It is interesting to note that those who remain despite Bed Bath's reduced size and prospects seem determined to stick by the stock until the end, whatever it may be, even just to warn investors not to gamble on the stock.

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We still expect Bed Bath & Beyond to eventually declare bankruptcy and won't alter our fair-value estimate of $0 on no-moat shares, said Morningstar analyst Jaime Katz. Our current outlook does not see any realistic profits until 2026—and that's only if Bed Bath can avoid running out of cash in the next few months. Even if Bed Bath miraculously remains a going concern, we do not see any return for shareholders.

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Bed Bath's stock price target recently climbed from $0 to a quarter, according to Wedbush analyst Seth Basham.

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The analyst maintained a rating of Underperform on the shares, explaining the bump up in his target was the result of an average probability-weighted calculation of likely outcomes, despite his perception that the turnaround plan for the company is unlikely to be realized by 2023, and that the company's equity is of little value if it is analyzed on a probability-weighted basis.

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There seems to be a more perfunctory approach among other analysts to covering the company. Zachary Fadem, a senior director at Wells Fargo, has not issued a stand-alone update on Bed Bath & Beyond since January when he told investors the company was "at the brink of bankruptcy" and a filing was imminent.

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Although shrinking analyst coverage is not Bed Bath's biggest problem at the moment, many investors will be happy to zig when analysts recommend that they zag, regardless of the company to which the call is made, because it will be a much safer investment.

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Nevertheless, it's one more sign that Bed Bath & Beyond still seems to be embroiled in a tug-of-war at this point in the case.

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