Credit Suisse: Bed Bath & Beyond Shares Could Fall To $39

Bed Bath & Beyond Inc. (NASDAQ: BBBY) has a lot in its plate to worry about: lower comps, weakening cash flows, pressured margins, little future visibility and increasing investments.

It's no wonder Credit Suisse is expecting a near-term downside for the stock around the $39 level "with upside to that dependent on the company's ability to resume positive comps and gross profit dollar growth, which were lower than expected in Q1," analyst Seth Sigman stated.

The analyst has a Neutral rating on the stock.

Related Link: Bed Bath & Beyond: Where Will Profit Erosion Stop?

Sigman trimmed his 2016 EPS estimate to $4.75 from $4.92 and cut the target price to $41 from $46.

"We think the company is generally doing the right things for the long term, but we see that continuing to pressure near-term results," Sigman wrote in a note.

Results And Expectations

Bed Bath & Beyond's first-quarter EPS came in at $0.80, down 14 percent, and $0.06 below expectations. Comps of -0.5 percent were below Street estimates of +0.6 percent, while EBIT margin was lower by 60bps (7.8 percent vs consensus at 8.4 percent), reporting the lowest margin since the third quarter of 2008.

Gross margin rate of 37.4 percent was below Street estimates (-75bps deleverage year-over-year vs -60bps in consensus estimates).

Full-year guidance was lowered for comps and EPS, with comps now expected to be flat to +1 percent (vs. 1–2 percent previously), and EPS to be "comfortably" within the $4.50–$5.00 range (vs. at the high end previously). The Street expects EPS of $4.99 for fiscal 2016.

At the time of writing, shares of Bed Bath & Beyond had fallen 3.1 percent to $41.84 on the day, but quickly rebounded to $43.62.

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