Bed Bath & Beyond is surging, but Wall Street analysts warn stock could fall 50% from here

Published Wed, Nov 3 20217:19 AM EDTUpdated Wed, Nov 3 20219:47 AM EDT

Jesse Pound @/in/jesse-pound @jesserpound

Wednesday's surge in Bed Bath & Beyond shares may be short lived, and investors should stay away, according to some Wall Street analysts. The stock was up more than 34% at more than $22 per share in early trading Wednesday, after the retailer announced a new partnership with Kroger to sell home and baby products on the grocery chain's website. Bed Bath & Beyond also announced a separate new digital platform and several management changes. However, the announcements did not do much to win over skeptical Wall Street analysts. Loop Capital Markets analyst Anthony Chukumba downgraded the stock to sell from hold, saying in a note to clients that the partnership with Kroger was not a game changer. "None of these developments materially alter our view BBBY has lost market share, mind share, and consumer relevance — which we believe is further confirmed by the continuation of the company's weak early F3Q 2021 sales trends last month. In addition, we question how many consumers are going to purchase toasters, flatware, or Roombas from a supermarket's website or stores," Chukumba wrote. Bed Bath & Beyond is considered one of the main meme stocks and has seen several bouts of volatility this year. More than 27% of the stock is sold short, according to FactSet, meaning that upward moves can cause a "short squeeze" where hedge funds and other large investors with bets against the stock are forced to buy shares to cover their positions, pushing the price even higher. Loop has a price target of $14 per share, which at one point was 50% below where the stock was trading in premarket action. Morgan Stanley's Simeon Gutman, who has an even lower price target at $12 per share, reiterated his underweight rating in a note to clients Wednesday and said Bed Bath & Beyond's fundamental results could continue to weaken in the months ahead. "Sheer breadth of announcements – despite relatively benign implications – seemingly a big catalyst for a highly shorted stock with low expectations. ... Extreme stock volatility may be back, but our [underweight] thesis on category reversion holds," the Morgan Stanley note said. —CNBC's Michael Bloom contributed to this report.

People wearing face masks walk past the Bed Bath & Beyond store in New York City.

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Wednesday's surge in Bed Bath & Beyond shares may be short lived, and investors should stay away, according to some Wall Street analysts.