WedBush Upgrades Bed Bath & Beyond (BBBY)

Retail’s revamped board of directors making effective changes.

WedBush upgraded shares of Bed Bath & Beyond (BBBY), from neutral to outperform. The research firm also upgraded its 12-month price target to $16 from $14. With shares trading around $10.50, that suggests at least 50 percent upside for shares of the big box retailer.

The analysis justifying the upgrade cited improved governance following some changes among the board of directors, as well as guidance to streamline stores and make them less cluttered ahead of the holiday season.

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  • The upgrade comes ahead of earnings from the company on Wednesday, and that earnings may not only stabilize, but grow over the next two years as these changes develop.

    In the past few months, the company has reduced corporate staff, eliminated the COO role, and is working to cut its inventory by $1 billion.

    Action to take: Shares are still 50 percent below their 52-week high, and yield just under 7 percent following the upgrade. They’re an interesting turnaround play, but with the early work done so far, it’s one that could continue to play out well for shareholders. Shares are a buy up to $11.

    Speculators may want to look at the January 2020 $15 call options. While they may not trade in-the-money after earnings this week, they can provide a leveraged move ahead of earnings—and if the share price goes down, the options will limit the loss compared to owning shares.