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The home products maker was tethered to the meme stocks phenomenon this year, where individual investors coordinated in online message boards like Reddit and Stocktwits to fuel eye-popping rallies in certain shares, costing short sellers billions of dollars.
If gains hold, it would be the stock’s best day in about five months.
About 29% of Bed Bath & Beyond free float is shorted, according to financial analytics firm Ortex. The surge in the company’s shares amid high short interest makes it ripe for a “squeeze” where investors betting against the company are forced to unwind their exposure to stem losses.
Analysts at BofA Securities said while Bed Bath & Beyond’s announcements were enough to squeeze short sellers, the company still faces risks in the coming months, including cost inflation pinching its margins.
Other retail darlings GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC) added 10.8% and 8.3%, respectively, while Koss Corp and BlackBerry (NYSE:BB) were up 4.6% and 4.3%, respectively.
Another highly shorted stock, Avis Budget (NASDAQ:CAR), doubled in value on Tuesday to $357.17 after strong results, but slid 18.2%.
AMC, Workhorse, Bed Bath & Beyond and Avis were among the most touted stocks on Stocktwits.
After a subdued October, the appetite of retail investors appears to be rising with most of their interest concentrated in technology stocks, analysts at Vanda (NASDAQ:VNDA) Research said in a weekly note on Wednesday.
Bed Bath & Beyond on Tuesday announced it would speed up its $1 billion share buyback program, saying it would complete it by the end of 2021, two years ahead of schedule. The company also said it was partnering with Kroger to bring its line of home and baby products to the grocer’s website.
“The announcements should be received positively by investors, especially the share buyback, which we estimate has the potential to reduce the share count by 15% and boost 2022 EPS,” Telsey Advisory Group analysts said in a client note.
