It looks like Bed Bath & Beyond (BBBY) may avert a cash crunch situation. The home-goods retailer has secured a loan deal after turning to JPMorgan Chase (JPM) for help, according to a Wall Street Journal (WSJ) report. Bed Bath & Beyond shares soared recently alongside GameStop (GME) and AMC Entertainment (AMC), in what some have called as the return of meme stocks.
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Bed Bath & Beyond Sought a $375 Million Loan
The retailer has been burning cash at a rapid rate, raising the need to raise more money to keep the business running. In the quarter ended May, Bed Bath & Beyond’s operations consumed more than $500 million in cash.
To avert a cash crunch situation, the retailer turned to JPMorgan to help in the marketing process to find lenders. The retailer has now picked a lender to provide it with a loan, but terms and size of the deal remain unknown, according to the WSJ report.
Bed Bath & Beyond was seeking a $375 million cash infusion. It needs the money to meet its operating cash needs and pay down its debt. The loan may help the retailer avoid product shortages at its stores that could turn away customers and hurt the business. According to a Bloomberg report, some of Bed Bath & Beyond’s suppliers have recently stopped shipments to its stores because of late payment for their goods.
Is BBBY Stock a Buy or Sell?
Bed Bath & Beyond shares have declined 67% over the past week, but they are still up 73% in the past month. Wall Street is bearish on the stock. According to TipRanks’ analyst rating consensus, BBBY stock is a Strong Sell based on 1 Hold and 12 Sells. The average Bed Bath & Beyond stock price prediction of $3.54 implies 60% downside potential.
In a typical meme stock fashion, retail investors are loading up on Bed Bath & Beyond shares at a time when Wall Street is sounding alarm bells on the stock. TipRanks’ Stock Investors tool shows that retail investor sentiment is currently Very Positive on BBBY. In the past 30 days, 31.7% of retail portfolios tracked by TipRanks increased their exposure to BBBY stock.
Final Thoughts
Bed Bath & Beyond needs cash to stay in business. The loan deal should provide a much-required shot in the arm to help the retailer survive. However, the strong retail investor interest in BBBY stock has nothing to do with the fundamentals, but a bet that this could become an exciting short squeeze battleground. About 38% of BBBY stock float is sold short, making the bears susceptible for a squeeze that could benefit retail bulls.
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