Bed Bath & Beyond stock sinks more than 24% after earnings miss but analysts see opportunity


Bed Bath & Beyond Inc. stock took a 24.5% nosedive in Thursday trading after COVID-19-related closures drove wider-than-expected losses and steep sales declines, but analysts are upbeat about the path forward for the troubled home retailer.

Bed Bath & Beyond
BBBY,
+4.26%

reported a fiscal first quarter adjusted loss of $1.96 per share and a 49% sales decline to $1.31 billion. The FactSet consensus was for a loss of $1.27 per share and sales of $1.39 billion.

June sales fell just 7%, according to Gustavo Arnal, Bed Bath & Beyond’s chief financial officer, who spoke on the Thursday earnings call. And year-over-year digital growth was 80%.

Nearly all of the company’s stores have reopened but about 200 store closures are planned in the next couple of years.

Read:Brooks Brothers files for bankruptcy as its take on office gear falls out of step with more casual trends

“This bounce back is much sharper than reported by other leading department stores that have recently reopened their stores and speaks to the strength of Bed Bath and Beyond’s brand and a spending shift to the home goods category,” wrote Wedbush analysts led by Seth Basham.

The company also talked up its liquidity, ending the quarter with $1.2 billion in cash and investments. Bed Bath & Beyond announced a new $850 million three-year secured asset-based revolving credit facility on June 22.

“With improving operating performance, inventory reduction opportunities remaining, potential asset sales outstanding, (including the litigious Personalization Mall sale, the potential to sale of Christmas Tree Shop and Cost Plus, as well as what we estimate to be ~$200m in additional real-estate, we remain comfortable with Bed Bath and Beyond’s liquidity position,” analysts said.

Wedbush rates Bed Bath & Beyond stock outperform and raised its price target to $14 from $12.

Bank of America highlighted the annualized savings expectation of $250 million to $350 million from the plan to close 200 stores.

“This is something the market has long anticipated and with a plan to eliminate overlapping stores and online sales growing strongly, this on its own should provide a strong comp and earnings tailwind,” analysts led by Curtis Nagle wrote.

Watch:41% of Black small businesses have closed since the pandemic

Bank of America rates Bed Bath & Beyond stock buy with a $16 price objective, up from $14.50.

Not all analysts were as positive. UBS focused on the boost the retailer got from stimulus checks and the demand in the home category, which rose as lockdowns forced more people indoors.

“This will probably fade,” wrote analysts led by Michael Lasser. “Thus, we think it’s best to assume that Bed Bath and Beyond’s comp trends remain under pressure for at least the intermediate-term.”

UBS rates Bed Bath and Beyond stock neutral with a $10 price target, up from $5.

Raymond James notes the sales at Buybuy Baby, which Bed Bath & Beyond said were 20% of the first quarter, compared with about 10% last year. By analyst calculations, the chain would total about $1.1 billion in annual revenue.

See: RH is planning to open hotels and sell houses, but analysts ask whether it can pull it off

“In our history with the company, we believe this is the first time they have disclosed revenue figures on any individual concept,” analysts said.

Raymond James rates Bed Bath & Beyond strong buy with a target price of $12, down from $13.

Bed Bath & Beyond stock has fallen by more than half (52.6%) for the year to date while the S&P 500 index
SPX,
+1.04%

is down 1.4% for the period.



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Tesla’s Q2 sales, impacted by COVID, is catalyst for the stock this week


Tesla Inc. is slated to report its April-June sales in the coming days, with Wall Street hoping to take a measure of just how much the closure of the Silicon Valley car-maker’s sole U.S. car-making factory has affected 2020 sales goals.

Tesla
TSLA,
+6.50%

reports quarterly deliveries, which are its proxy for sales, and production numbers within a few days of the end of a quarter. The Tesla factory in Fremont, Calif., was closed roughly half the quarter under regional shutdown orders designed to slow the spread of the coronavirus.

Analysts polled by FactSet consensus expect deliveries of 72,000 vehicles, of which 61,000 would be Model 3 mass-market sedans and the remainder roughly split between sales of the Model S luxury sedan and the Model X SUV.

Those are heightened expectations from last week’s. Tesla shares surged more than 7% on Tuesday and are poised for another all-time closing record.

Don’t miss:Elon Musk vs. Bay Area officials: These emails show what happened behind the scenes in the Tesla factory fight

Investors are hoping that Tesla’s Shanghai factory, which came on line earlier this year, picked up some of the slack. Tesla’s inventory from the first quarter also could help with sales in the April-June period.

Wall Street also would welcome sales numbers for the Model Y, the compact SUV that is Tesla’s newest vehicle in the lineup.

Tesla has not exactly backed off its goal to sell more than 500,000 vehicles this year, but it has changed its tune somewhat, telling investors in late April it had the “capacity installed” to deliver more than half a million vehicles in 2020 “despite announced production interruptions.”

The electric-car maker said in early April it delivered 88,400 vehicles in the first quarter, a performance the company called its “best ever” first quarter and a number only a tad below Wall Street expectations.

Analysts at Evercore ISI pegged their second-quarter sales expectations at between 80,000 and 84,000 units, with sales in China offsetting a predicted sales decline in North America and a “steep decline” in sales in Europe.

Tesla had between 14,000 and 20,000 vehicles in inventory from the first quarter, the Evercore ISI analysts said.

Read:Michigan-assembled Ford Ranger named ‘most American-made car’ in annual list that includes Tesla for first time

Analysts at Deutsche Bank expect deliveries of 76,000 units, of which 60,000 would be Model 3 sedans.

“We estimate Tesla was able to produce 34,000 Model 3 units out of the Shanghai (factory) and about 21,000 in Fremont,” they said. “But we do not believe Tesla was able to reach full Model Y production levels.”

They estimated Model Y production between 10,000 and 13,000 units in the second quarter, or roughly 300 a day.

Tesla reopened the Fremont factory amid a standoff with local health authorities that included Chief Executive Elon Musk calling the shutdown “fascist” and suing the county where the factory is located. The lawsuit was eventually dropped.

Shares of Tesla have gained 131% this year, and recently cracked $1,000. The gains contrast with losses of 6% and 12% for the S&P 500 index
SPX,
+0.64%

and the Dow Jones Industrial Average
DJIA,
-0.15%

, respectively.



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Nvidia data-center sales top $1 billion for first time, earnings beat expectations


Nvidia Corp.’s data-center sales topped $1 billion for the first time at the start of 2020 as the company beat expectations for earnings and sales, but shares were sluggish in late trading Thursday following nearly a week of record closes.

Nvidia
NVDA,
-2.17%

reported first-quarter net income of $917 million, or $1.47 a share, compared with $394 million, or 64 cents a share, in the year-ago period. Adjusted earnings were $1.80 a share, compared with 88 cents a share in the year-ago period. Revenue rose to $3.08 billion from $2.22 billion in the year-ago quarter.

Analysts surveyed by FactSet had forecast earnings of $1.65 a share on revenue of $2.97 billion. Nvidia had forecast revenue of $2.94 billion to $3.06 billion, which had factored in a $100 million headwind from the COVID-19 pandemic.

Shares shifted between slight gains and losses, and were last down 1% in after-hours trading, following a 2.2% decline in the regular session to close at $351.01. Thursday’s regular session was the first decline for Nvidia’s stock after a run of four consecutive closes at record highs.

Business in the Age of COVID-19: Nvidia should dodge coronavirus effects thanks to data centers and videogames

Nvidia’s two largest segments are chips for gaming and data centers, both of which seem safe from negative effects from the coronavirus pandemic after emerging from a year of struggle at the end of 2019. Data-center operators continue to push new chips into their servers to increase machine-learning capabilities for cloud customers and their own usage, while videogames have enjoyed a strong surge amid shelter-in-place requirements.

Nvidia launched new data-center products like its A100 graphics-processing unit last week as part of its annual GTC event, introducing a new architecture for its GPUs, dubbed Ampere. Chief Executive Jensen Huang said then that the new chips were already being shipped to customers, including the largest cloud-computing offerings such as Amazon.com Inc.’s
AMZN,
-2.05%

Amazon Web Services, Microsoft Corp.’s
MSFT,
-1.20%

Azure and Alphabet Inc.’s
GOOGL,
-0.17%

GOOG,
-0.27%

Google Cloud.

For more: Nvidia unveils Ampere GPU architecture for AI boost, and the first target is coronavirus

Nvidia reported gaming revenue of $1.34 billion, up from $1.06 billion in the year-ago period. Data center revenue came in at $1.14 billion, the first time the segment has cleared $1 billion in sales. That’s up from $634 million a year ago. Analysts had expected a 24% rise in gaming sales to $1.3 billion from a year ago, and a 62% surge in data-center sales to $1.03 billion.

“Cloud is a $100 billion market segment of IT today, growing at 40% into a $1 trillion opportunity,” said Jensen Huang, Nvidia founder and chief executive, on a conference call. “Cloud computing is the single largest IT industry transformation that we have ever seen. The two forces that are really driving our data-center business are AI and Cloud computing. We’re perfectly positioned to benefit from these two powerful forces.”

Nvidia expects second-quarter revenue of $3.58 billion to $3.72 billion, while analysts had forecast revenue of $3.25 billion.

Patrick Moorhead, principal analyst at Moor Insights & Strategy, called the quarter “phenomenal” given the pandemic.

“The A100 data-center training/inference product appears to be off on a rocket-ship start, a very good sign,” said Moorhead in emailed comments. “Gaming and workstation growth are directly tied to competitive products and the need to work, govern and school from home.”

Nvidia shares are up 49% for the year. In comparison, the PHLX Semiconductor Index
SOX,
-2.70%

is down 3% in 2020, the S&P 500 index
SPX,
-0.77%

is down 9%, and the tech-heavy Nasdaq Composite Index
COMP,
-0.96%

is up nearly 4%.

Of the 40 analysts who cover Nvidia, 32 have buy or overweight ratings, five have hold ratings, and three have sell ratings, along with an average price target of $325.18, according to FactSet data.



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