KeyBanc Initiates Bed Bath & Beyond (BBBY) with an Underweight
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KeyBanc initiates coverage on Bed Bath & Beyond (NASDAQ: BBBY) with an Underweight rating and a $25 downside price target.
The firm said, "We anticipate the Company's operating margin will remain pressured in 2008 and potentially 2009 due to a number of factors. Procurement costs are rising due to the declining value of the dollar, the retail environment has been weak and more promotional, and the Company's costs are deleveraged in a weaker sales environment. The Company's balance sheet is healthy, with a strong cash balance and no debt, and we believe cash flow will be used to fund organic growth and share repurchase. As a result, over the next three to five years, we project EPS growth of 9-12%. While we admire BBBY as one of the best operators in the retail sector, we believe valuation is rich and expectations are optimistic. As a result, we take a more cautious view on the stock."
Bed Bath & Beyond, Inc. and its subsidiaries operate a chain of retail stores in the United States and Canada. The company sells a variety of home products, kitchen products, and holiday items.
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