Bed Bath & Beyond (BBBY): Will Earnings Spark This Meme Stock?
Our preview of the upcoming week's earnings reports includes Bed Bath & Beyond (BBBY), Micron (MU) and Walgreens (WBA)
Will Bed Bath & Beyond (BBBY, $30.25) be the belle of the meme-stock ball yet again?
The troubled retailer takes the spotlight on the earnings calendar on June 30, and it does so by having one of its best first halves in recent memory ... at least on a share-price basis. BBBY stock is up 70% so far in 2021, though it has been a wild ride that has seen the stock double at a couple of points this year, and even triple.
Why the red-hot action in BBBY shares?
In part, simply a better operational environment. An explosion in homebuying has meant good things for the home-furnishings retailer. And several new initiatives have given hope to investors that the struggling chain might possibly be on the verge of a real turnaround.
CFRA analyst Kenneth Leon recently upgraded shares to Hold from Sell, saying, "Our rating upgrade is based on our confidence management can execute major brand transformation that will accelerate the digital experience, ration stores by closing low demographic locations, remodel most stores, and bring on new stores all in the new store layout and website that showcases eight new brand product categories recently introduced."
But BBBY has also been caught up in the recent trend of day traders piling into heavily shorted stocks with the (often successful) goal of triggering short squeezes that send shares soaring.
Not everyone is hyped about BBBY, however.
UBS's Michael Lasser (Sell) notes the possibility that irons in the fire such as its branding campaign and private-label products could breathe life into Bed Bath. And he also thinks BBBY should make progress on things such as its supply chain and store remodels.
However, "While these initiatives should help over the LT, we believe the retailer will face stiff headwinds from consumers shifting wallet share away from home furnishings," Lasser says. "This will likely materialize as consumers head back to the office (data from Kastle shows that only 31.5% of workers have returned to the office)."
"When demand slows, discounting & promos will likely increase, offsetting some of the idiosyncratic potential that BBBY has," adds Lasser.
As far as Bed Bath's upcoming report: The pros are looking for a 34.9% year-over-year jump in revenue to $1.87 billion. That will fuel a swing from a loss of $1.96 per share in the year-ago quarter to an 8-cent-a-share profit.
Earnings Spotlight: Micron Technology
Micron Technology (MU, $80.58) is a prime example of how easy year-over-year comparisons are already baked into share prices.
The chipmaker will report fiscal third-quarter earnings after the June 30 close. The pros, on average, are looking for $7.2 billion in revenues (+35.5% YoY) and earnings of $1.70 per share, or more than double the year-ago figure.
However, shares have rocketed 62% over the past year already, despite slowing-down over the past couple of months. At the same time, MU stock is underperforming the market, with just a 7% gain for the year-to-date -- and that's after investors digested a positive earnings pre-announcement just a few weeks ago.
"We don't expect many surprises with F3Q (May) results," says Deutsche Bank's Sidney Ho, who rates the stock at Buy. "We still think F4Q (Aug) guidance will point to solid sequential revenue and EPS growth on continued pricing strength, but we do note more mixed data points recently related to end market strength and pricing trends."
However, the analyst adds that in the near term, "investor sentiment on MU has turned more conservative, and hence we believe an in-line F4Q guide with DB estimates should be enough to lead MU's shares higher."
Earnings Spotlight: Walgreens Boots Alliance
Walgreens Boots Alliance (WBA, $52.10), like many other stocks, enjoyed a robust rally to start the year but has since flattened out over the past couple months. To wit, WBA shares are up 30% so far in 2021 but are virtually breakeven since late March.
Will Walgreens' Thursday morning quarterly report inject some life back into shares?
Analysts appear to be all over the place on the subject. On average, they're looking for a 2.5% decline in revenues to $33.76 billion, but a 64.8% jump in profits to $1.17 per share. However, Argus Research analyst Christopher Graja points out that "there are a wide range of estimates from $0.80 to $1.35 for fiscal 3Q, which includes the months of March, April, and May." And his own estimate of $1.07 per share is below the consensus.
Even then, Graja, who has a Hold rating on shares, sees some reason for optimism.
"We like the company's emphasis on healthcare with the ramp-up of VillageMD primary care clinics and the sale of most of the former Wholesale division," he says. "We also think that Rosalind Brewer is a perfect pick as the company's new CEO."