New Meme-Stock Rally: Bed Bath & Beyond Surges, But Experts Warn Hype Poses “Considerable Risk.”

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Topline

The volatility faced by top meme stocks like Bed Bath & Beyond increased on Tuesday — with stocks skyrocketing and then collapsing before rising again — as analysts warn institutions are doubling their bearish bets against the stock, despite retail traders holding back. seem to spark interest in what could be another fateful short squeeze.

Key Facts

Bed Bath & Beyond shares skyrocketed as much as 20% to a price of $3.70 on Monday, even as analysts have turned increasingly bearish on shares, with Wedbush, for example, slashing the stock’s price target to just $1 amid speculation surrounding the retailer’s possible bankruptcy.

To further complicate matters, Nasdaq warned on Thursday that the company has failed to meet regulatory requirements as it is yet to file quarterly reporting for the period ending Nov. 26; If Bed Bath & Beyond, which says it is working “diligently” on the report, doesn’t submit a plan to regain compliance by March 13, the stock could be delisted from the Nasdaq exchange.

Retailers may be hoping for a repeat of what happened to Hertz in 2020, says trading platform Capital.com analyst Justin McQueen, citing the embattled car rental service whose shares skyrocketed more than 800% after bankruptcy.

As the company struggles for survival, McQueen acknowledges that Bed Bath & Beyond’s stock is a likely target for a short squeeze, in which highly shorted stocks skyrocket as traders plow into a stock and push prices up, but warns that the company’s rally is “driven”. by hype” rather than financials, posing a “significant risk to buyers,” especially if the retailer files for bankruptcy.

Other analysts have been equally cautious: Michael Wilson, investment manager of Morgan Stanley, warned Monday that this year’s stock market rally looks particularly fragile as it is led by “low quality, heavily shorted” stocks such as Bed Bath & Beyond, AMC and GameStop , which rose 46%, 49% and 25% respectively this year.

Crucial quote

“Given the continued poor investor sentiment and weakening macroeconomic backdrop, it is not unusual to see sporadic short squeezes fueled and then chased by retail investors,” Vanda Research analysts wrote in a recent message to clients. “We still consider a continued meme rally unlikely unless markets become friendlier [economic] regime,” the team adds, assuming that traders will likely rush to reap profits before it is too late.

Despite their recent gains, shares of Bed Bath & Beyond have plunged 90% from a closing high of around $35 in January 2021, as retail traders plowed into heavily shorted stocks with cash and drove a massive rally. Retailers’ renewed interest this year follows reports that the struggling retailer is preparing a Chapter 11 bankruptcy filing that could come within weeks. The company has stated that it is exploring actions including restructuring, refinancing debt, selling assets and filing for bankruptcy relief, even acknowledging that the measures may not ultimately be successful. Meanwhile, fellow meme stock GameStop has collapsed about 80% since its peak two years ago.

Read further

Bed Bath & Beyond Reportedly Planning Bankruptcy As Meme Shares Crash Amid ‘Substantial Doubt’ Business Can Continue (TSTIME)

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