Stern Agee Initiates Bed Bath & Beyond (BBBY) With Neutral Rating

Stern Agee analyst Jennifer Milan initiated coverage of Bed Bath & Beyond Inc. (Nasdaq: BBBY) with a Neutral rating.

Milan observed that with 1,083 stores Bed Bath & Beyond Inc. is the largest pure-play investment for a home furnishings retailer and has an estimated 15% share of the $49 billion home furnishings market.

Bed Bath & Beyond Inc. believes that its core brand has room to grow by an additional 400+ stores in the U.S. and Canada.

Milan liked the fact that the company generates a lot of free cash flow and holds $3.90 cash per share, with no debt.

The Stern Agee analyst wrote, "share price seems to price in potential upside at current levels. While we view BBBY as a strong brand with viable long-term growth prospects, and believe that the company should be the short-term beneficiary of forfeited sales from Linens ‘n Things, we believe the upside is largely reflected in the share price at these levels. Currently BBBY shares are trading at 15.7x and 1.3x our FY11 estimates on a P/E and Price/Sales basis, respectively, relative to the company’s five-year historical averages of 16.6x and 1.5x. BBBY shares have appreciated 73% since the end of FY08 and are approaching the five-year high."