Bed Bath & Beyond Inc. (NASDAQ:BBBY) is poised to continue its turnaround, according to Wedbush analysts, who reiterated an ‘Outperform’ rating on the retailer with a 12-month price target of $13.
Shares of Bed Bath & Beyond traded hands at $8.50 on Tuesday, having gained more than 72% so far this year.
The firm’s call comes ahead of the company’s third quarter earnings report, due after markets close on October 27.
“Bed Bath & Beyond has essentially completed its endeavor to lower fixed costs, improve profitability, and grow its business, positioning the company to drive significant shareholder value in the next few years,” the analysts believe.
They noted that the company is reintegrating the Buy Buy Baby brand into Bed Bath & Beyond while working to unlock the value from its tZERO assets.
The analysts expect consistent revenue and profitability improvement throughout 2025 as Overstock.com grows its close-out business, Bed Bath & Beyond and Buy Buy Baby penetrate customers in different life stages, and gross margins expand following the elimination of unprofitable SKUs.
“Bed Bath & Beyond can drive substantial revenue growth next year, as it returns to inventory expansion on a more profitable SKU set, as it leverages its various brands alongside the others, and as its marketing campaigns help build momentum in re-expanding its customer base,” they wrote.
Over time, the analysts expect the retailer to generate revenues of $750 million or more each quarter with operating profits approaching $50 million or more per quarter.
“If we’re right, shares remain attractive even after their 120% improvement over the last 6 months … and patient investors will be handsomely rewarded,” Wedbush wrote.
For the third quarter, Wedbush expects Bed Bath & Beyond to report revenue of $268 million, slightly above the Wall Street consensus estimate of $260 million, and and adjusted EBITDA loss of $7.4 million versus the consensus loss of $10.6 million.
The analysts said website and industry data trended positively during the quarter, with total webpage view declines moderating to -9% year-over-year compared with -21% in the year-ago quarter.
“With Beyond’s focus on driving better profitability by eliminating unprofitable SKUs and fixed cost reduction, we see potential for strong flow-through on any top-line upside, but note the company could choose to flow some incremental profitability into customer acquisition,” the analysts concluded.