Bed Bath & Beyond goes into meme stock mode
Ryan Cohen — the man credited with GameStop taking off — took a large 9.8% stake in Bed Bath & Beyond (NASDAQ:BBBY), which sent the stock up 35%.
Back to the GameStop days
In Aug. 2020, Ryan Cohen took a large stake in GameStop — leading to a massive rally in GME and the birth of meme stocks. BBBY joined the meme stock pump — though not to the degree of GME.
- Stock: Since his stake was disclosed, GameStop jumped nearly 20x — 60x at its peak.
- Financials: Sales are up 30% in the recent quarter compared to a year ago while profit margins have fallen.
Although new game console launches boosted sales, supply chain issues impacted margins. Cohen’s impact on the business is uncertain, but he definitely has on its stock price…
GameStop really took off when Cohen joined the board — but so far Cohen said he has no plans to join BBBY’s board.
BBBY has been sinking for many years…
In 2019, BBBY hired a new CEO from Target to turn around its struggling business — planning to add private labels, reduce store numbers, make prices more competitive and buy back stock. But external supply problems were too much to handle…
During its recent earnings report in January:
- Sales in the first quarter fell 14% compared to last year — losing sales from supply chain-driven inventory shortages.
- BBBY lowered sales and earnings expectations for the current year — its many problems unlikely to be resolved for now.
The plan: Cohen’s wants BBBY to sell itself or sell its baby-product business — and “narrow its focus to fortify operations”.
Investors: Right place, right time
In 2021, short interest — the percentage of shares betting against the asset — in GameStop was over 130% — which led to a massive short squeeze and amplified its price swings. Comparatively, BBBY’s short interest is only at 26%.
GameStop was in the right place, right time — high short interest, strong retail investor backing (thanks WallstreetBets), momentum from being the first meme stock, increased gaming during COVID and well-timed new console launches.
BBBY could see greater price swings from news of Cohen’s involvement — but a GME repeat would be difficult.