Shares of retailer Bed Bath and Beyond (BBBY) have been down roughly 77% over the past four years, as earnings have come under pressure from increasing competition.
However, the stock has done very well since better-than-expected fourth-quarter results were reported in March. Furthermore, the company has outlined a detailed plan for improvement, with activist investors also pressing for changes. The company may be on the verge of a great turnaround, and the stock is very cheap at 8X this year’s earnings per share (EPS) estimates.
It is also important to keep in mind that the operating margins for BBBY are now at sustainable levels. The company still generates a lot of free cash flow and its balance sheet is strong. Buy BBBY under $17.50. My price target is $21.
At the same time, sell JPMorgan (JPM), which has returned a market-beating, dividend-aided 21% for us. The stock has surpassed my $114 target and is selling close to last year’s top, which may be hard to surpass in the near-term with loan growth slowing, consumer credit losses inching up and hope for a steeper yield curve fading.
Additional changes in the Value Authority Recommended List are possible over the next week, so please be prepared to act upon any guidance I give.
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