Bed Bath & Beyond (NASDAQ:BBBY) stock is soaring 29% in early trading and trending on social media, even though the retail chain is widely expected to be headed for bankruptcy. Some retail investors may be trying to turn BBBY stock into the next name that rallies for a while after going belly up.
On Thursday, the troubled retailer disclosed that, based on its financial results and outlook, it has “substantial doubt” about its ability to avoid bankruptcy. Its cash balance is low after the sales for its third quarter that ended in November sank more than 30% year-over-year. The firm noted that it could go bankrupt but added that it was looking to take steps to improve its balance sheet and is pursuing “all strategic alternatives.”
The Wall Street Journal reported on Thursday night that the retailer was getting ready to declare bankruptcy “within weeks.” However, the article also stated that such a scenario is not yet inevitable.
Meanwhile, a number of analysts expressed skepticism about Bed Bath & Beyond’s outlook. Global Data’s Neil Saunders stated, “The turnaround plan put in place last year is not working … Put bluntly the business is moving at rapid speed in the wrong direction with bankruptcy the most likely destination.” KeyBanc slashed its price target on BBBY stock to just 10 cents from $2.
BBBY Stock: Another Post-Bankruptcy “Winner?”
In recent years, a number of stocks, including Hertz (NASDAQ:HTZ) and Revlon (OTCMKTS:REVRQ), shot up for some time after the companies declared bankruptcy. Retail investors may be looking to trigger a similar phenomenon with BBBY stock.
Jan Rogers Kniffen, a retail expert, told Yahoo Finance that the company’s liquidation would hurt Bed Bath & Beyond’s competitors in the short term.
On the publication date, 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.