(By Balachander) Bed Bath & Beyond Inc. (NASDAQ:BBBY) shares were downgraded to "Perform" from "Outperform" by Oppenheimer & Co. Inc. on concerns that drivers of upside is waning for the home fashion retailer near term.
The brokerage, which has a price target of $80 on the stock, said it is increasingly concerned that the potential for consistent and meaningful sales
and earnings upside at BBBY is beginning to wane as recent key product cycles and outsized market share opportunities fade and coupons again emerge as a more significant traffic driver for the chain.
Oppenheimer said investors are apt to scrutinize more closely sales and gross margin trends than ongoing gains from cost controls or buybacks. BBBY's position as a compelling "housing play" now seems well telegraphed in the market.
"Clients should interpret our downgrade of BBBY shares as a signal that for at least the next few quarters we view the potential for outsized sales and earnings at the chain as limited," the brokerage said.
"We prefer stories with greater business model "sales and earnings slack" such as HD, LOW, and PIR," Oppenheimer wrote.
However, the brokerage is of the view that BBBY remains an attractive core holding for longer term-oriented investors. The Bed Bath & Beyond business model is by no means broken or in structural decline. BBBY remains one of the primary "market share grabbers" in the home furnishing sector, Oppenheimer said.
BBBY will report second-quarter results on Wednesday.
"Our now more subdued outlook for BBBY shares represents a call on prospects for the chain over the next several quarters and is not necessarily reflective of our view of the chain?s upcoming second-quarter earnings announcement," the brokerage said.
On Tuesday, shares dropped 1.65 percent to trade at $69.60. The stock has been trading in the 52-week range of $53.15 to $75.84.