Bed Bath & Beyond Stock Forecast: Can Sue Gove turn BBBY around?

Interim CEO Sue Gove nearly doubled her stake in BBBY.
Bed Bath & Beyond posted terrible earnings on June 29.
BBBY dropped by a quarter in value after recent earnings release.
BBBY stock jumped 18.8% to $5.31 on Thursday's open.

Clay Webster FXStreet

Bed Bath & Beyond (BBBY) stock jumped more than 18% on Thursday's open after it was announced that director and now interim CEO Sue Gove paid $231,000 to nearly double her stake in the embattled big-box retailer. Gove purchased shares at an average price of $4.61, and BBBY shares are trading near $5.31, up 18.8%, in the first half-hour after Thursday's open.

Also read: Amazon Stock Deep Dive: AMZN price target at $106 with near-term risks offset by long-term growth

BBBY stock news: Interim CEO faces challenges

Gove was named interim CEO after former chief executive Mark Tritton was let go one week ago following one of the worst earnings misses in the home good retailer's history. BBBY stock plunged by 23.6% on January 29 after Bed Bath & Beyond reported adjusted earnings per share (EPS) of $-2.83. This missed Wall Street consensus by an astounding 104%. Sales missed consensus by over $46 million and amounted to a 25% decline YoY.

Ryan Cohen, known for his tenure with Chewy and GameStop, pushed the board to fire Tritton due to differences in strategy. Cohen owns about 1/10th of BBBY and is pushing for the retailer to boost national brands and reduce spending, according to Bloomberg. Cohen bought his stake in BBBY for north of $17 a share.

As interim CEO, Sue Gove must now make BBBY attractive enough that the board can hire better executives and possibly a new CEO, all while managing a turnaround on her own even as a recession peers from the shadows. Retailers like BBBY are normally the first to get hit during recessions as potential customers reduce spending, and quite a few analysts think BBBY is just stalling before an inevitable bankruptcy.

BBBY stock forecast: In bad shape despite rally

BBBY needs to make a run at closing the gap with $6. That level was the June 16 range low and came a few weeks before BBBY stock gapped down to below $4. Currently, BBBY is trading just below the 9-day moving average despite its 18% rally. Many traders will likely take profit around the 21-day moving average, which is now near $6.36. As you can see from the Accumulation/Distribution line at the bottom of the chart, BBBY is in bad shape. It is going to take more than insider buying to salvage this company, but it is a good start.

BBBY daily chart

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Author

Clay Webster

FXStreet

Clay Webster grew up in the US outside Buffalo, New York and Lancaster, Pennsylvania. He began investing after college following the 2008 financial crisis.

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