Bed Bath & Beyond has a history of negative earnings reactions
Bed Bath & Beyond Inc. (NASDAQ:BBBY) is scheduled to report first-quarter earnings after the close next Wednesday, June 27. The retailer has a history of negative earnings reactions, and with BBBY trading near a trendline that's had bearish implications in the past -- it might be time to brace for the stock's next leg lower.
Over the past eight quarters, BBBY stock has closed lower the day after the retailer's earnings report five times -- including the last four in a row. On average, the shares have swung 9.4% in the subsequent session over this two-year time frame, regardless of direction. This time around, the options market is pricing in a 13.8% next-day move.
Strengthening the chance this post-earnings price action will occur to the downside is Bed Bath & Beyond's recent rally into its 160-day moving average. Specifically, the shares ran headlong into this familiar layer of resistance, after rebounding off their May 9 nine-year low of $16.52 -- last seen trading at $20.14.
According to Schaeffer's Senior Quantitative Analyst Rocky White, their have been seven other times in the past three years BBBY stock has come within one standard deviation of its 160-day moving average after a significant stretch below this trendline. Following these previous signals, the retail shares averaged a one-month loss of 5.95%, with two-thirds of the returns negative.
At least one group of options traders appears to be betting on another post-earnings drop for BBBY. The stock's weekly 6/29 20-strike put has seen the biggest increase in open interest over the last two weeks, and data from Trade-Alert points to significant buy-to-open activity here.
Skepticism has been growing among short sellers, too. Short interest is up more than 22% since early April to 23.79 million shares. Bed Bath & Beyond stock could encounter even stiffer headwinds, should shorts continue to ramp up their bearish exposure to the retailer.