Bed Bath & Beyond Fallout Offers a Warning to Meme-Stock Traders

(Bloomberg) — Investors betting that Bed Bath & Beyond Inc. would be the next meme stock to go to the moon are faced with the stark reality that fundamentals are especially important during a market rout.

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Shares of the home goods retailer fell 24% to $4.99 on Wednesday, crashing to the lowest since April 2020, after the company reported disappointing results. This follows a tumultuous two years when the company captivated retail marketers alongside stocks like GameStop Corp. and AMC Entertainment Holdings Inc.

“The retail investor is learning a hard lesson as all favorite meme stocks are crushed,” said Ed Moya, senior market analyst at Oanda. “Releases for Bed Bath & Beyond, a favorite retail stock, have been strong and coordinated buying is not happening.”

Bed Bath & Beyond’s quarterly loss was larger than analysts expected and first-quarter comparable sales and net sales were also lower than estimates. Adam Crisafulli of Vital Knowledge said “investors expected the worst from Bed Bath & Beyond, and they were still disappointed.” The retailer’s stock extended its losses on Wednesday from its January 2021 closing high to 91%.

Yet retail investors have shown that old habits die hard. Bed Bath & Beyond was among the most bought stocks on Fidelity’s platform as individuals shrugged off missed sales, piling up amid the stock’s slide. The stock has garnered renewed interest on websites such as WallStreetBets and Reddit’s Stocktwits, with the company’s ticker trending for most of the day on both platforms.

Minutes before reporting its results, the Union, New Jersey-based company named Sue Gove as interim chief executive, replacing Mark Tritton.

The company was caught up in the stock mania early last year and again in June as investors bought shares in a coordinated effort channeled through social media platforms.

Another big jump came in March this year when Ryan Cohen’s investment firm RC Ventures called for a corporate overhaul, but that move failed to gain momentum as meme stocks and riskier assets weakened. The company’s market value peaked at $6.4 billion in January 2021, a far cry from its current valuation of $399 million.

(Updates with share movement throughout.)

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