Could Bed Bath & Beyond’s Stock Rise By 50% Post COVID-19 Crisis?

by Trefis Team
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Bed Bath & Beyond
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Comparing the trend in Bed Bath & Beyond‘s (NASDAQ: BBBY) stock over recent months with its trajectory during and after the Great Recession of 2008, we believe that the stock can potentially gain 50% once fears surrounding the coronavirus outbreak subside. Our conclusion is based on our detailed comparison of BBBY’s performance against the S&P 500 in our interactive dashboard analysis, 2007-08 vs. 2020 Crisis Comparison: How Did BBBY’s Stock Fare Compared With S&P 500?

Between February 19th and April 13th, BBBY stock has lost 57% of its value (vs. about a 19% decline in the S&P 500). A bulk of the decline came after March 6th, when an increasing number of Coronavirus cases outside China fueled concerns of a global economic slowdown. Matters were only made worse by fears of a price war in the oil industry triggered by an increase in oil production by Saudi Arabia.

BBBY’s Stock Has Fallen Considerably Because The Situation On The Ground Has Changed

Consumers under lockdown-style conditions could likely forego home-improvement projects and focus on buying necessities such as food and medicine. In fact, home improvement and housing go hand in hand with the overall economic conditions which seem to be struggling due to the COVID-19 pandemic.

At first, BBBY’s inventory got a hit due to the factory shutdowns and delays from China as it is dependent on China for its supply chain. Now, the rise in Coronavirus cases in the U.S is only making it worse for the retailer. BBBY is already struggling with margin pressure and declining store traffic amid competition from e-commerce and omnichannel competitors. To add to that, a decline in its digital presence in its previous quarters suggest a weak prospect for the company going forward.

We believe BBBY’s upcoming Q4 (coming out on April 15) results will confirm this reality with a drop in its total revenues. If signs of coronavirus containment aren’t clear by its July Q1 earnings timeframe, it’s likely BBBY’s stock is going to see a continued drop when results confirm palpable reality.

Bed Bath & Beyond’s Stock Witnessed Something Similar But At Smaller Scale During The 2008 Downturn

We see BBBY stock declined from levels of around $30 in October 2007 (the pre-crisis peak) to roughly $19 in March 2009 (as the markets bottomed out) – implying that the stock lost as much as 39% of its value from its approximate pre-crisis peak. This marked a lower drop than the broader S&P, which fell by about 51%.

However, BBBY stock recovered post the 2008 crisis, to levels of about $34 in early 2010, rising by 81% between March 2009 and January 2010. In comparison, the S&P bounced back by about 48% over the same period.

Will BBBY’s Stock Recover Similarly From The Current Crisis?

Keeping in mind the fact that BBBY stock has fallen by 57% this time around compared to the 39% decline during the 2008 recession, we believe it can potentially recover by 50% to levels of near $8 once economic conditions begin to show signs of improving. This marks a partial recovery back to the $15 level BBBY stock was before the coronavirus outbreak gained global momentum. BBBY was in the midst of a hail Mary turnaround even before the spread of COVID-19 began. This could potentially keep the company’s stock away from recovering fully to its pre-crisis level.

That said, the actual recovery and its timing hinge on the broader containment of the coronavirus spread. Our dashboard forecasting US COVID-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread of the virus.

Further, our dashboard -28% Coronavirus crash vs 4 Historic crashes builds a more complete macro picture and complements our analyses of Coronavirus impact on a diverse set of BBBY’s peers – competitor Home Depot and Lowe’s. The complete set of coronavirus impact and timing analyses is available here.

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