NEW BULLISH Plays
Bed Bath & Beyond - BBBY - close: 61.25 change: +0.31
Stop Loss: 59.35
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on November -- at $---.--
Listed on November 07, 2015
Time Frame: 6 to 8 weeks.
Average Daily Volume = 1.9 million
New Positions: Yes, see below
Retail stocks have been showing some resilience lately. There have been multiple analyst calls suggesting that this holiday season might be a disappointment. Yet the retail stocks have continued to shrug off these headlines.
BBBBY is in the services sector. They are part of the home furnishings industry. According to the company,
"Bed Bath & Beyond Inc. and subsidiaries is a retailer selling a wide assortment of domestics merchandise and home furnishings which operates under the names Bed Bath & Beyond, Christmas Tree Shops, Christmas Tree Shops andThat! or andThat!, Harmon or Harmon Face Values, buybuy BABY and World Market, Cost Plus World Market or Cost Plus. Customers can purchase products from the Company either in-store, online or through a mobile device. The Company has the developing ability to have customer purchases picked up in-store or shipped direct to the customer from the Company's distribution facilities, stores or vendors. In addition, the Company operates Of a Kind, an e-commerce website that features specially commissioned, limited edition items from emerging fashion and home designers. The Company also operates Linen Holdings, a provider of a variety of textile products, amenities and other goods to institutional customers in the hospitality, cruise line, healthcare and other industries. Additionally, the Company is a partner in a joint venture which operates retail stores in Mexico under the name Bed Bath & Beyond."
The earnings outlook for BBBY has been lukewarm. The company has been reporting earnings in-line with estimates. Guidance has also been in-line with expectations. BBBY's comparable stores sales are virtually flat with +0.7% gain last quarter. Meanwhile management is boosting their stock buyback program. Their prior repurchase plan had dwindled down to $300 million. They just announced another $2.5 billion buyback plan.
Why are investors buying BBBY with growth stalling? It's possible traders see BBBY shares as cheap. The stock has retreated from resistance near $80 in early 2015 down toward support in the $55-56 area (late September-early October). With the bounce off its October lows the stock still trades with a P/E less than 12.
If there is a time to bet on a bounce in retail-related stocks then the Q4 time frame is it. The U.S. has a strong labor market. Unemployment just fell to 5%, which for many is considered full employment. Wages for U.S. workers are rising (finally!). Gasoline prices are nearing their lowest levels since 2008. Consumers should have more money in their pocket.
Technically shares of BBBY seem to have bottomed. The point & figure chart is already bullish and forecasting at $69 target. The last several days have seen BBBY's stock breakout past major resistance near $60.00 and its long-term trend line of lower highs. Traders just bought the dip at prior resistance (new support) this past week. Tonight we are suggesting a trigger to launch bullish positions at $61.55.
Trigger @ $61.55
- Suggested Positions -
Buy BBBY stock @ $61.55
- (or for more adventurous traders, try this option) -
Buy the 2016 JAN $65 CALL (BBBY160115C65) current ask $1.39
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.
Option Format: symbol-year-month-day-call-strike