Today is shaping up negative for Bed Bath & Beyond Inc. (NASDAQ:BBBY) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the downgrade, the consensus from 18 analysts covering Bed Bath & Beyond is for revenues of US$6.4b in 2023, implying a chunky 18% decline in sales compared to the last 12 months. Per-share losses are expected to creep up to US$7.63. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$7.2b and losses of US$3.05 per share in 2023. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.
The consensus price target fell 57% to US$5.56, implicitly signalling that lower earnings per share are a leading indicator for Bed Bath & Beyond's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Bed Bath & Beyond analyst has a price target of US$17.40 per share, while the most pessimistic values it at US$3.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Bed Bath & Beyond's past performance and to peers in the same industry. One more thing stood out to us about these estimates, and it's the idea that Bed Bath & Beyond's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 24% to the end of 2023. This tops off a historical decline of 8.6% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 6.4% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Bed Bath & Beyond to suffer worse than the wider industry.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Bed Bath & Beyond. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Bed Bath & Beyond.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Bed Bath & Beyond analysts - going out to 2025, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.