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.
Cautious Investing to All
