Soaring over 40% in pre-market trading today, Bed Bath & Beyond (NASDAQ:BBBY) stock is one of the morning’s top trending tickers. Some investors and pundits are saying that the name, whose shares already jumped 33% on Friday, has become the next big short squeeze.
BBBY Stock Has the Ingredients Needed for a Short Squeeze
A huge 52% of the available shares of Bed, Bath & Beyond are being sold short, while the company has become one of the most widely discussed names on Reddit.
Last year, a number 0f stocks that were heavily shorted and frequently talked about on Reddit soared tremendously. Among the names with those characteristics in 2021 were GameStop (NYSE:GME), AMC Entertainment (NYSE:AMC), Koss (NASDAQ:KOSS), and Bed, Bath and Beyond itself.
Bed, Bath & Beyond’s Business Has Been Struggling
The retailer’s comparable-store sales tumbled 28% year-over-year last quarter, and it’s reportedly coping with a cash crunch, forcing the company to attempt to obtain new loans. Moreover, the firm has been shedding market share, as demand for the retailer’s products has been contracting. And like some of its peers, Bed, Bath & Beyond has recently been the victim of inventory and supply chain problems.
Before today’s wild early morning trading, BBBY stock had tumbled 44% so far this year and 71% over the last 12 months.
Meanwhile, last week, the retailer terminated a private brand called Wild Sage that it had launched just last year. The shutdown of the brand, which featured “bedding, decor and furniture” suggests that the firm’s strategy of touting its own brands has not been working well. The latter initiative was launched under the auspices of its former CEO, Mark Tritton.
Bank of America Is Bearish on BBBY Stock
Noting that Bed, Bath & Beyond currently has a large debt of $3.3 billion, Bank of America analyst Jason Haas does not think that the company can borrow another $1 billion. The latter move was suggested by one of the owners of BBBY stock, Freeman Capital.
Haas wrote on July 22: “The company’s CEO and a number of other executives recently departed, the turnaround strategy has not worked as planned, inventories are bloated and consumers are broadly pulling back on discretionary spending.”
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.