Option Trade
Bed Bath & Beyond Inc. (NASDAQ:BBBY) Puts 
Monday, 4th April, 2016

**OPTION TRADE: Buy the BBBY Aug 2016 50.000 put (BBBY160819P00050000) at approximately $3.50. Place a pre-determined sell at $7.00.

Note: No protective stop losses added -- but if you wish to do so make it $1.40.

by Ian Harvey

April 04, 2016

Wall Street views Bed Bath & Beyond Inc. (NASDAQ: BBBY), a specialty retailer of domestic merchandise and home furnishings, offering up very modest top-line and bottom-line growth in its earnings report, late Wednesday, 6th April.

In its report, this New Jersey-based specialty retailer is expected to report that in the fiscal fourth quarter it had earnings of $1.80 per share. That would be the same as in the corresponding quarter of last year. The Wall Street consensus estimate is just a penny per share higher, though it also was $1.80 just 60 days ago.

Wall Street overestimated Bed Bath & Beyond revenue in the previous quarter, and this time is looking for about $3.37 billion. That would be less than 2 percent higher year over year, but it would the highest in the past two years. Wall Street also sees revenue for the full year up less than 2 percent from a year ago.

Bed Bath & Beyond has struggled over the last year, with a string of in-line or weaker than expected quarterly reports. The company has struggled to grow earnings, with analysts forecasting earnings to fall by 0.6% for the current full year, and rising just 2.2% next year.

BBBY has climbed higher with the rest of the market during the past month — likely in large part due to a bit of a short squeeze, thanks to 9.46% of the company’s shares being sold short and a short ratio of 6.43 — but the bullish bounce is likely to be over. It’s time for the longer-term downtrend to take control.

It is not expected that much has changed fundamentally for the company. With anemic year-over-year EPS growth rates and negative cash flow growth, BBBY is going to have a hard time making a case for a turnaround.

After steadily losing ground in 2015, the stock rebounded during the first part of the year, and is up 2.1% on the year.

The company has a market cap of $7.94 billion and a P/E ratio of 9.79. The company has a 50-day moving average of $48.84 and a 200 day moving average of $52.08. Bed Bath & Beyond has a 52 week low of $41.26 and a 52 week high of $78.10.

Bed Bath & Beyond Inc. had its price target lowered by Nomura from $56.00 to $50.00 in a research note issued last Wednesday. The firm currently has a “neutral” rating on the retailer’s stock. Nomura’s target price would suggest a potential upside of 0.73% from the company’s current price.

Also, equities research analysts at Wedbush reduced their Q2 2016 earnings per share estimates for Bed Bath & Beyond in a report issued last Wednesday. Wedbush analyst S. Basham now expects that the firm will post earnings per share of $0.92 for the quarter, down from their previous estimate of $0.96. Wedbush currently has a “Neutral” rating and a $46.00 target price on the stock. The consensus estimate for Bed Bath & Beyond’s Q2 2016 earnings is $0.92 per share. Wedbush also issued estimates for Bed Bath & Beyond’s FY2018 earnings at $5.05 EPS.

Also, several other equities research analysts have recently commented on the company.

• Vetr upgraded shares of Bed Bath & Beyond from a “sell” rating to a “hold” rating and set a $50.50 price objective for the company in a research report on Monday.

• Guggenheim began coverage on shares of Bed Bath & Beyond in a research note on Tuesday, March 15th. They set a “neutral” rating on the stock.

• Zacks Investment Research cut shares of Bed Bath & Beyond from a “hold” rating to a “sell” rating in a research note on Monday, March 14th.

• Wolfe Research began coverage on shares of Bed Bath & Beyond in a research note on Monday, February 29th. They set a “sector perform” rating and a $47.00 target price on the stock.

• Finally, Oppenheimer reaffirmed a “hold” rating on shares of Bed Bath & Beyond in a research note on Sunday, February 14th.

Seven equities research analysts have rated the stock with a sell rating, twenty have assigned a hold rating, two have given a buy rating and one has assigned a strong buy rating to the company’s stock. Bed Bath & Beyond has a consensus rating of “Hold” and an average price target of $50.00.

Harvey’s Options Volatility Indicator

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

**OPTION TRADE: Buy the BBBY Aug 2016 50.000 put (BBBY160819P00050000) at approximately $3.50. Place a pre-determined sell at $7.00.

Note: No protective stop losses added -- but if you wish to do so make it $1.40.

”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.



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