Shares of home furnishing chain Bed Bath and Beyond (NASDAQ:BBBY) extended their recent surge on Tuesday. The stock was up by more than 70% during intraday trading, bringing its total monthly gains to a staggering 450%. At the beginning of August, BBBY was trading for just over $5.00 per share. Now, just two weeks later, the stock hit an intraday high price of $28.00, invoking memories of other short squeezes like AMC (NYSE:AMC) and GameStop (NYSE:GME).
Bed Bath and Beyond’s short squeeze has some familiar undertones to it. A nostalgic business that is teetering on the brink of bankruptcy, BBBY stock saw its short interest jump up above 100%. Of course, a short squeeze wouldn’t be a short squeeze without plenty of social media chatter. Below is a reading of social media conversation about BBBY.
Source: Chatterquant.com
Chatter really picked up on August 5th which was the first big move higher during this recent short squeeze. By August 8th, BBBY Twitter and BBBY Reddit discussion was off the charts. But what led to all of this?
Why is Bed Bath and Beyond Squeezing?
There are likely a number of different reasons why this BBBY short squeeze is taking place. First, the overall sentiment on the market has improved. The major averages have clawed back some of their losses and the S&P 500 is out of bear market territory.
Second, GameStop Chairman and Meme industry legend Ryan Cohen owns a 10% stake in Bed Bath and Beyond. It was also recently revealed that his venture capital firm RC Ventures bought way out-of-the-money calls with strike prices between $60 and $80 that expire in January of 2023. It is a sizable bet on a company that is struggling both financially and operationally. Cohen famously advised Bed Bath and Beyond to restructure its business and sell off its Buybuy Baby brand.
Finally, the massive short interest combined with BBBY being the most trending ticker on r/WallStreetBets is the perfect recipe for a retail-led short squeeze. It’s being talked about more than stocks like GameStop, AMC, and Tesla (NASDAQ:TSLA) and it isn’t particularly close:
Source: Chatterquant.com
Source: Chatterquant.com
Source: Chatterquant.com
How High Will BBBY Short Squeeze?
As we know, there is no way to anticipate how high a short squeeze will run. According to Ortex, the short interest was down to about 50% as short sellers closed out their positions at a loss. With BBBY climbing by over 70% during Tuesday’s trading session, this could be the peak of the BBBY short squeeze. Typically during a short squeeze the largest spikes occur as short sellers buy shares to close out their shorts.
In an interesting contrast, BBBY’s short squeeze has come amidst a slew of analyst downgrades. These include notes from B. Riley which downgraded the stock to a Sell rating and Loop Capital which famously slapped a $1.00 price target on the stock.
Even as it appears that most of the squeezing has likely already taken place, it is difficult to count out further movement due to the overwhelming sentiment on social media. It’s the first short squeeze frenzy that we have seen in over a year and the exuberance behind the stock is clear. Once again, social media has been the catalyst of a historic short squeeze, which begs the question: which stock will be next?