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A B. Riley analyst downgraded Bed Bath & Beyond (NASDAQ:BBBY) from Neutral to Sell on valuation.
The analyst also reiterated a $5 per share price target that implies a downside risk of almost 70%. The move lower on the rating scale comes after BBBY shares rose more than 3x since the end of July.
She attributes this buying frenzy to Wall Street Bets Reddit forum.
“We believe that BBBY is currently trading at unrealistic valuations,” she said in a client note.
However, the analyst also sees positives in the recent run-up in shares as it could provide the company “a long-term lifeline”.
“Prior ‘meme stocks’ including GME and AMC have used their prior boosts to raise capital through an at-the-market (ATM) offering to help generate cash,” the analyst added.
Cash generation is crucial for BBBY as the company is “facing fundamental issues with its business including declining liquidity and concern around the upcoming August 2024 $300M note with approximately $285M left to repay,” she concluded.
BBBY stock is down 2.5% in premarket Tuesday.
