Shares of Bed Bath & Beyond (NASDAQ: BBBY) are up more than 20% since news broke that Ryan Cohen took a nearly 10% stake in the home goods retailer.
Cohen co-founded the pet-focused e-commerce site Chewy, which was acquired by PetSmart for over $3 billion in 2017. He currently serves as chairman of GameStop, which has seen its shares soar after he made a large investment in the video game chain in late 2020.
Investors are intrigued by Cohen's plans to turn around Bed Bath & Beyond's struggling retail operations and maximize the value of its assets. Yet analysts question whether its stock has come too far, too fast.
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Wells Fargo analyst Zachary Fadem has an underweight rating on Bed Bath & Beyond's shares. He believes the retailer's stock is worth $20 per share, which is roughly the price it closed at on Friday.
Fadem thinks Cohen's plans to streamline Bed Bath & Beyond won't be enough to overcome its deteriorating business fundamentals. The company's core retail operations remain under pressure from e-commerce rivals, a trend that's likely to persist in the coming years. He thus views the stock's recent rally as an opportunity for investors to lock in profits by selling their shares.
Bank of America analyst Jason Haas shares a similar view. He has an underperform rating on Bed Bath & Beyond's stock, due in part to the threats posed by online competitors.
Moreover, a big part of Cohen's plan is for Bed Bath & Beyond to spin off its Buybuy Baby business. Yet Haas argues that the chain, which offers clothing and other merchandise for infants and young children, is not worth the "several billion dollars" that Cohen claims.
Fadem and Haas rightfully highlighted several important risks that could derail Bed Bath & Beyond's recovery. Investors should ponder these threats -- and consider selling their shares today.
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Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns and recommends Chewy, Inc. The Motley Fool has a disclosure policy.
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