Meme stock Bed Bath & Beyond on a price frenzy: Reddit users cause short squeeze

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• Bed Bath & Beyond stock is through the roof
• Reddit forum WallStreetBets responsible for price rally
• Analysts remain skeptical

The Bed Bath & Beyond share knew no stopping on Monday: The daily high rose to 13.34 US dollars, the paper finally said goodbye to NASDAQ trading with a whopping plus of 39.83 percent at 11, $41. The balance of the last few days and weeks is also impressive. The paper has gained around 73 percent in value in the past five days, and within a month it even went up more than 108 percent.

Aside from the magnitude of the stock’s rally, it’s worth noting that there’s no corporate news behind the rally that would in any way justify such a surge. Instead, the Reddit forum WallStreetBets is once again responsible for the strong run, which already in 2021 caused the brilliant rally at the games retailer GameStop and the cinema chain AMC Entertainment.

Mentions of Bed Bath & Beyond are growing at WallStreetBets

Bed Bath & Beyond stock was the most searched name on WallStreetBets forum discussion boards Monday, Quiver Quantitative found out, but mentions of the name have also spiked significantly over the past seven days. As CNBC writes, various users agreed to buy Bed Bath & Beyond shares under the thread “GME, BBBY and AMC Memestock Megathread for Monday August 8th, 2022”. Individual Reddit users stated that they had even taken out a loan in order to be able to invest everything in the retailer’s shares.

Short squeeze provoked

Bed Bath & Beyond stock is widely shorted. However, if there is a significant increase in such a share certificate within a short period of time, this can result in a short squeeze. Short sellers of the stock flee the paper by buying back the shorted shares to avoid large losses, which in turn drives the price even higher. As Ortex analyst Evan Nui comments to Reuters, that’s probably exactly what happened at Bed Bath & Beyond on Monday: “We believe Bed Bath & Beyond is currently experiencing a short squeeze.”

Pundits remain skeptical about Bed Bath & Beyond stock

However, as 50 Park Investments CEO Adam Sarhan warned Reuters, such price increases are usually only “short-lived” and the affected shares would tend to lose value again. He doesn’t really see the rally as anything special: “This type of extremely strong movement is the exception, but something like this happens again and again.”

Analysts have little praise for the BBBY paper. As Loop Capital expert Anthony Chukumba recently wrote about the retailer in a customer report obtained by MarketWatch: “The stores have a greater focus on low-cost items, which we believe reduces the shopping experience. Ultimately, the stores are located, in our opinion , is in poor condition and the store associates seem very distant. We find that the general (and frankly perhaps our own) estimates are far too optimistic. Accordingly, we reiterate our Sell rating and price target of $1.00.”

Hope for investor Ryan Cohen

Users at WallStreetBets, on the other hand, put their faith in the activist investor Ryan Cohen, who has been active at Bed Bath & Beyond for a long time and has already successfully initiated various changes, such as the resignation of the “overpaid CEO” and the establishment of three new board seats would have brought, as stated in a post in the forum. Now it only remains to be seen whether Cohen will be able to meet the high expectations of small investors. It has already been shown in the past that meme stocks are extremely volatile and therefore associated with an extremely high risk.

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