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The Biggest Sale Bed Bath & Beyond Has Ever Had… on Its Own Stock
Is $BBBY taking a page out of the $RH Playbook?
On November 2, $BBBY announced that it was accelerating its $1 billion three-year share repurchase program to now be completed by the end of fiscal 2021. The last time we saw a buyback this aggressive and bullish was from Citron favorite RH when the co. announced a $700 million buyback authorization in May 2017 when the stock was trading at $52. Two months later, RH completed the buyback and you know the rest of the story.
While we are not suggesting that $BBBY is the next $RH… don’t tell that to Mark Tritton… who wants to be the next Gary Friedman.
There are clear parallels from this aggressive move by $BBBY with $RH four years ago.
Management and the BOD believe the stock is highly undervalued
This aggressive buyback shows there are no liquidity concerns
The shareholder structure is more concentrated than the market appreciates (e.g., 42% of $BBBY shares outstanding are held by the top 3 holders BlackRock, Fidelity, and Vanguard)
Analysts and investors can see in the latest $BBBY 10-Q filing that the company has completed the initial $600 million tranche of this buyback at an average price of $25 while repurchasing stock in tranches as high as $29 (i.e., 50% higher).
No one knows the intrinsic value of this company more than this board… same $RH argument and they believe the stock is undervalued even at $29.
Applying a 5x EBITDA multiple on 2024 EBITDA of $800 million to $1 billion we arrive at a price target of $50 to $70, so can see why management sees value here.