Bed Bath & Beyond: Massive Short Squeeze Could Be Coming Soon

Aug. 16, 2022 10:37 AM ETBed Bath & Beyond Inc. (BBBY)163 Comments
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Summary

  • Bed Bath & Beyond is ready for an epic short squeeze due to its low float, high short interest, and growing retail investor interest.
  • Billionaire Ryan Cohen bought a 9.8% stake in the company back in March 2022 and BBBY has made several key changes to turn the company around.
  • BBBY is the #1 trending stock ticker on reddit WallStreetBets and could soar just like GameStop did in January 2021.

Bed Bath And Beyond Releases Q4 Earnings Figures

Kevork Djansezian/Getty Images News

During my high growth stock research, I came across Bed Bath & Beyond (NASDAQ:BBBY) and noticed a massive opportunity for a huge short and gamma squeeze.

This isn't just some stock pick that could go up 50% or 100% over the next few months.

I truly believe BBBY is like GameStop 2.0 and could make money for smart investors who recognize the opportunity and take action.

Business Overview

Bed Bath & Beyond is an American based home and kitchen retail chain that sells things you would need for your bedroom, kitchen, or dorm room.

Bed Bath & Beyond was a struggling niche retail chain that experienced the "Amazon Effect" when Cohen bought his initial stake.

However, the company is beginning its current turnaround with new CEO Sue Grove. She bought 50,000 BBBY shares under $5 and could help transform the company's declining revenue and same-store sales.

In Q1 2022, BBBY comparable same-store sales fell 24% and revenue fell to $1.46 billion. The company is drowning in $3.28 billion in debt with only $107 million in cash on its balance sheet.

BBBY soared to $30 in March 2022, but shares are currently down 11% YTD.

Chart
Data by YCharts

So what caused the March 2022 BBBY stock price?

A billionaire activist investor bought a huge stake in the company.

His name is Ryan Cohen.

The Ryan Cohen Effect

Ryan Cohen is a Canadian billionaire activist investor who is famously known for his helping hand in the GME stock boom last year.

He purchased 7,780,000 BBBY shares with 16,701 call options expiring on January 20 2023 at $60 to $80 strike prices.

If exercised, Ryan Cohen would own 9,450,100 BBBY shares, giving him an 11.8% stake in the company.

BBBY stock has many similarities to the GME squeeze, so I've considered going all-in on the stock:

  • Both BBBY and GME stock traded as low as $5
  • Ryan Cohen only owns 2 stocks in his RC Ventures portfolio: GME and BBBY
  • Retail investors got behind GME to send it to the moon. BBBY is gaining massive social media attention recently.
  • GME had a high short interest and got bashed in mainstream media before the squeeze happened. Many media pundits (Jim Cramer) are now attacking BBBY.
  • GME had 76 million shares outstanding in January 2021 before the 2022 4 to 1 stock split. BBBY has 75 million shares outstanding as of August 2022.

The similarities are frightening but what I like the most is that Ryan Cohen is a long term investor and hasn't sold a single BBBY share or call option.

Ryan Cohen's BBBY Stock & Options Purchases

Here's a chart listing all of his stock & call options purchases:

Transaction # of Securities Average Cost Date
Purchase of Common Stock 1,000,000 14.769 01/13/2022
Purchase of Common Stock 500,000 15.286 01/14/2022
Purchase of Common Stock 300,717 14.393 01/20/2022
Purchase of Common Stock 99,283 13.076 01/21/2022
Purchase of Common Stock 50,000 14.91 01/25/2022
Purchase of Common Stock 200,000 15.048 01/26/2022
Purchase of Common Stock 251,336 13.844 01/27/2022
Purchase of Common Stock 440,981 14.489 01/28/2022
Purchase of Common Stock 44,333 16.581 01/31/2022
Purchase of Common Stock 609,941 16.471 01/31/2022
Purchase of Common Stock 187,962 16.976 02/01/2022
Purchase of Common Stock 156,574 17.102 02/02/2022
Purchase of Common Stock 75,000 16.079 02/04/2022
Purchase of Common Stock 83,873 16.278 02/07/2022
Purchase of Common Stock 70,000 15.823 02/14/2022
Purchase of Common Stock 30,000 16.228 02/16/2022
Purchase of Common Stock 75,000 14.031 02/22/2022
Purchase of Common Stock 367,833 15.206 02/24/2022
Purchase of Common Stock 500,000 13.66 02/24/2022
Purchase of Common Stock 500,000 14.577 02/24/2022
Purchase of Common Stock 300,000 13.426 02/24/2022
Purchase of Common Stock 542,621 16.223 02/25/2022
Purchase of Common Stock 115,000 16.114 02/25/2022
Purchase of Common Stock 500,000 16.601 02/28/2022
Purchase of January 2023 Call Option ($60 Exercise Price)* 4,757 0.9324 02/28/2022
Purchase of January 2023 Call Option ($75 Exercise Price)* 243 0.7603 02/28/2022
Purchase of January 2023 Call Option ($60 Exercise Price)* 5,000 1.4693 03/01/2022
Purchase of January 2023 Call Option ($60 Exercise Price)* 1,500 1.4115 03/01/2022
Purchase of January 2023 Call Option ($75 Exercise Price)* 201 1.0803 03/01/2022
Purchase of January 2023 Call Option ($80 Exercise Price)* 5,000 0.7103 03/01/2022
Purchase of Common Stock 307,341 16.9429 03/01/2022
Purchase of Common Stock 311,660 16.7564 03/01/2022
Purchase of Common Stock 70,545 16.68 03/01/2022
Purchase of Common Stock 69,516 17.254 03/02/2022
Purchase of Common Stock 20,484 16.809 03/03/2022

His average BBBY cost basis is $15.34 yet BBBY shares are trading at a 16% discount as of August 15 2022.

That means savvy investors can open a BBBY position at a cheaper price than Cohen did back in March 2022.

It's likely not too late to invest in BBBY stock if you truly stand behind Ryan Cohen.

BBBY Stock is Undervalued

The best way to evaluate BBBY is to look at similar retail companies and compare their valuations.

BBBY stock is significantly undervalued, possibly partly due to all the short selling recently.

Company Price to Sales Ratio
Bed Bath & Beyond 0.16
GameStop 1.94
Walmart (WMT) 0.63
Target (TGT) 0.77
Ross Stores (ROST) 1.62

GME trades at 15 times higher P/S ratio than BBBY. It's one of the lowest valuations across the entire retail industry and screams undervalued to the astute investor.

I've never seen a company generate over $7 billion in annual revenue yet trade at such a low valuation.

No wonder Ryan Cohen bought a massive stake. Billionaires buy assets on sale when nobody else wants them akin to Warren Buffett's value investing strategy.

How High Can BBBY Go?

GME stock traded around $4 then soared to as high as $480 in January 2021. At the time, GME stock had a high short interest and caused an epic short squeeze that cost short sellers billions of dollars.

According to Ortex, BBBY has a short interest of 47%.

GameStop hit $480 during its peak in 2021 and I believe BBBY shares could soar to triple digits within the next few weeks.

My BBBY price prediction is $250 per share with the potential for $500 if BBBY follows the exact same path GameStop did.

I used a P/S ratio model coupled with improved brand awareness now that Ryan Cohen and the Wall Street Bets crowd are behind the stock.

Bed Bath & Beyond would need to achieve positive comparable same-store sales, boost average revenue per store, and revive its brand to compete with Walmart (WMT) and Target (TGT) for customers.

Ryan Cohen has a "Midas Touch" when it comes to niche retailers. He succeeded with Chewy (CHWY) and GameStop. Is it smart to bet against him this time around?

If BBBY stock achieves a similar P/S ratio of 1.94, that would put BBBY stock at $192 per share.

GameStop reached a $36 billion market cap at its peak and now trades around $12 billion.

Chart
Data by YCharts

BBBY has a current market cap of ~$1.3 billion. There is a chance that BBBY stock follows a similar runup just like GME did in terms of market cap.

If BBBY's market cap hits $36 billion then the stock would trade at ~$450 per share.

This is pure speculation based on what took place during January 2021. We're talking about FOMO driving an extremely high price for BBBY shares.

It's also possible that BBBY beats Q2 earnings expectations in late September 2022, which would add more bullish price momentum.

Chart
Data by YCharts

The squeeze will occur once short sellers are forced to buy back their shares.

According to Apewisdom, BBBY is the #1 trending stock on Reddit.

Both forces together could send BBBY shares soaring to triple digits just like GME did last year.

I adjusted my price target down to $250 because I expect plenty of early buyers to take profits if BBBY stock soars to mid triple digits.

Risk Factors

I don't have a crystal ball, folks. There are several risk factors that disrupt a potential squeeze.

  1. Robinhood and other brokers delete the buy button and restrict investors from buying BBBY stock (that's what happened to GME).
  2. BBBY does a stock offering and dilutes its shareholder base.
  3. Macro-economic factors cause a shift in market sentiment and investors start selling off stocks.
  4. Retail investors listen to the mainstream media and sell BBBY shares instead of holding.

But I believe the biggest risk is betting against Ryan Cohen. This guy sold Chewy in 2017 to Petsmart for $3.3 billion then helped GME stock's eventual rise.

Conclusion

BBBY is a high risk, high reward meme stock that could really soar if retail investors catch FOMO with the stock.

The good news is more people could be shopping at Bed Bath & Beyond due to all the recent retail investor interest.

I don't see too many opportunities like BBBY everyday.

This could be GameStop 2.0 if everything plays out perfectly.

This article was written by

Investor Trip profile picture
3.09K Followers
Investor Trip is a global investment community that focuses on hypergrowth assets like growth stocks and cryptocurrency. Our investment strategy is to identify sectors with massive growth potential then pick the biggest & best companies that will become future winners. We discuss both US & international stocks as well as high performing assets such as Bitcoin. Follow us to receive notifications whenever a new article is published.

Disclosure: I/we have a beneficial long position in the shares of BBBY either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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