Bed Bath & Beyond (NASDAQ:BBBY) shares lost two-thirds of their value in the first half of 2022 as sales plummeted.
The meme stock craze has revived Bed Bath & Beyond (NASDAQ:BBBY) this month. The shares ended July at $5 and closed Monday at $16.
Bed Bath & Beyond (NASDAQ:BBBY) stockholders should sell during this meme stock rise to limit losses (or pocket profits). This month’s rally isn’t sustainable. Bed Bath & Beyond stock may lose much of its recent gains once it peaks.
Another squeeze
Bed Bath & Beyond (NASDAQ:BBBY) stock has been a hot target for short-sellers due to falling market share and profitability. Bed Bath & Beyond’s share price peaked at about $80 in early 2015 and has gone down since then, benefiting short-sellers.
BBBY stock is prone to short squeezes due to strong short interest, especially in the previous two years. Short-sellers must purchase to close off lost positions, driving the price upward when a highly shorted stock goes on a tear.
36% of Bed Bath & Beyond’s 80 million outstanding shares were shorted in late July. Due to a recent spike in meme stocks, Bed Bath & Beyond stock has soared 218% this month.
No cause for optimism for Bed Bath & Beyond
Bed Bath & Beyond (NASDAQ:BBBY) hasn’t provided any news to support the demonstration. Bloomberg reported earlier this month that the corporation is seeking private loans to boost its cash, although that seems more desperate than strong. While inflation began to decline in July, it remains high by modern standards, so increasing prices for staples will likely continue to curb discretionary expenditure.
BBBY’s first-quarter sales drop and deficit haven’t disappeared. Analysts predict the renowned shop to continue losing money as consumers switch to competitors or cut down on home-related purchases.
Transient Gains
Bed Bath & Beyond (NASDAQ:BBBY) business is still in tatters; therefore, the stock’s recent rebound won’t continue long. BBBY’s current short squeeze is the largest since January 2021, although the company has endured several in the last two years. Each time, it lost most or all of its gains within two months.
This time shouldn’t be different. Long-term investors may benefit from this month’s surge if BBBY issues new shares. The corporation needs at least $500 million (possibly more) to support near-term losses and turnaround efforts. With a market worth of $1.3 billion (up from $400 million a month ago), a stock offering may raise that amount.
A stock sale would weaken BBBY shareholders’ interests and make short-selling easier. It may keep the stock from plunging to last month’s lows, but it would make it tougher to maintain today’s high price.
BBBY shareholders shouldn’t be greedy. The stock may rise in the short term, but the gains won’t last.
Featured Image: Megapixl @Beruldsen
Author Shariq Khan 
