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Bed Bath & Beyond (BBBY) Stock Rose 16% on a Loan. Is It a Buy?

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Updated 24 Aug 2022

Key points:

  • Bed Bath & Beyond stock surged 15.6% on rumours of a new loan.
  • The retailer was struggling to pay its suppliers despite the meme stock rally.
  • BBBY stock had fallen massively after Ryan Cohen sold his stake.

The Bed Bath & Beyond Inc (NASDAQ: BBBY) stock price surged 15.6% on rumours that it had secured a new loan that could help it resolve some of its current financial challenges.

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The home goods retailer had seen its share price plunge heavily in the past week after billionaire activist investor Ryan Cohen said that he was selling his stake in the company triggering a massive exodus of other investors.

Also read: The Best Breakout Stocks To Buy Right Now.

However, BBBY stock got some relief today after news emerged that it had secured a loan to meet its financial obligations. Investors cheered the rumours, although nothing had been confirmed as of writing. In addition, it had emerged that suppliers had halted deliveries to the retail chain due to missed payments.

Bed Bath & Beyond was seeking to raise $350 million from lenders to help alleviate a cash crunch that had left it unable to pay suppliers on time, threatening its existence.

The retailer had enjoyed a meme-stock-inspired rally earlier this month, which saw its shares rally from $4.91 to a high of $30.00 on Wednesday, August 17, 2022. However, the stock fell heavily the next day after Ryan Cohen announced that he had sold his stake to pocket a 468 million profit.

However, Bed Bath & Beyond has to rethink its business strategy to remain afloat, given the massive number of physical retailers that have declared bankruptcy recently. We have household names such as Pier1, Modell’s and Stein Mart, and Dressbarn, which went bankrupt and were acquired by other investors.

Many of the above retail stores are now fully online after their new owners transformed their previous brick-and-mortar businesses into online stores. Moving to a fully-online store helped the new investors cut out all the expenses associated with operating physical stores, including salaries, wages, and rent payments, among other overheads.

Bed Bath & Beyond may have to consider such a drastic measure but may face significant challenges since it would have to fire almost all its employees and close all its physical stores. In addition, such a drastic shift is difficult to pull off, so the other retailers had to declare bankruptcy before the new owners could implement the drastic changes.

Therefore, I would steer clear of BBBY stock, given that it burned through $500 million in the quarter ended May 2022, without factoring in what has happened to its peers.

*This is not investment advice. Always do your due diligence before making investment decisions.

Bed Bath & Beyond stock price.

Bed Bath & Beyond stock price 24-08-2022
Source: Tradingview

The Bed Bath & Beyond stock price surged 15.6% to trade at $10.15, rising from Tuesday’s closing price of $8.78.