Bed Bath & Beyond Inc. shares surged 510% over three weeks and, in the process, helped buy in meme stocks. Wall Street sounded alarm bells over its concern about the stock’s lofty valuations.
The home goods retailer saw buying spree in its counter extending on Tuesday as the stock surged 75% to $28.04. More than 160 million shares were traded, which triggered a trading halt. According to data from Bloomberg, the stock was the most actively traded counter. Call options volumes betted on the stock to trade above $45 by the end of the week, while those with money could look at $80 by mid-January. According to Bloomberg data, the stock derivative was the most active among the derivatives segment.
The stock has surged despite the downgrading of home goods companies by at least their Wall Street bankers. Two of them even advised the investors to sell the meme stock in the current frenzy.
Unrealistic Valuations
Susan Anderson of B Riley Securities have cut her recommendation from neutral to sell. She called the retailer’s valuation of $2.2 billion unrealistic. Justin Kleber at investment banking company Baird downgraded the ratings of the shares last week before the stock surge. He warned the share’s risk/reward ratio looked unattractive and the company was burning cash.
Despite the negative outlook on the stock, the surge continued as retail traders and investors pumped in $99 million in the stock since July 26, according to data platform Vanda. The net inflow on Monday was a record $46 million when the shares jumped 24% to close at an all-time high since April.
Other meme stocks such as AMC Entertainment Holdings Inc. and GameStop Corp. also burst in their trading activity. The movie theater company erased its earlier losses to rise by 2.4%. In comparison, the video game retailer jumped 12 % and triggered a halt to trading on its counter.
Bed Bath & Beyond was the top buy on Fidelity’s platform, with more buyers than sellers at one point of time at 10.51 am in New York. Its ticker trended most on StockTwits, a popular chatroom, and at WallStreetBets on Reddit.
Despite all the surges, the stock is still down by nearly 60% from January 2021. AMC and GameStop have also lost market value since last year’s peak.
