Alarm bells ring for meme stock investors as Bed Bath & Beyond plunges

Investors betting that Bed Bath & Beyond would be the next meme stock to go to the moon are facing the harsh reality that fundamentals are particularly important during a market rout.

Shares of the home-goods retailer sank 24 per cent to $US4.99, crashing to the lowest since April 2020, after the company reported disappointing earnings. It follows a tumultuous two-year stretch when the company captivated retail traders alongside stocks like GameStop and AMC Entertainment.

Shares in the company plunged by 24 per cent after it reported disappointing earnings and replaced CEO Mark Tritton (centre).Credit:AP

“The retail investor is learning a tough lesson as all the favourite meme stocks are getting crushed,” said Ed Moya, senior market analyst at Oanda. “The outflows for Bed Bath & Beyond, a favourite retail stock, have been significant and the coordinated buying is not happening.”

Bed Bath & Beyond’s quarterly loss was wider than analysts expected and first-quarter comparable sales and net sales also fell short of estimates. Vital Knowledge’s Adam Crisafulli said “investors expected the worst out of Bed Bath & Beyond, and they still disappointed.” The retailer’s stock extended losses from its January 2021 closing high to 91 per cent.

Yet retail investors showed that old habits die hard. Bed Bath & Beyond was among the most bought stocks on Fidelity’s platform as individuals ignored the sales miss, piling in amid the share slump. The stock saw a surge in interest on websites like Reddit’s WallStreetBets and Stocktwits with the company’s ticker trending for most of the day on both platforms.

Just minutes before releasing earnings, the company named Sue Gove as its interim chief executive officer, replacing Mark Tritton.

“Investors expected the worst out of Bed Bath & Beyond, and they still disappointed.”

The company was caught up in the meme stock mania at the start of last year and again that June as investors snapped up shares in a coordinated effort channelled through social media platforms.

Another big jump came in March this year when Ryan Cohen’s investment firm RC Ventures called for a shake-up at the company, but the move failed to gain momentum as meme stocks and riskier assets faltered. The company’s market value soared to a peak of $US6.4 billion ($9.3 billion) in January 2021, a far cry from its current $US399 million valuation.


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