E-commerce specialist Beyond (NYSE:BYON) — a brand formerly known as Bed Bath & Beyond which was adopted by online retailer Overstock — saw its shares move modestly higher on Friday. Earlier this morning, Seeking Alpha reported that Needham analysts are pounding the table on BYON stock. More than likely, this action puts great pressure on bearish speculators, who have been caught on the wrong side of the trade.
According to the article, analyst Anna Andreeva upgraded BYON stock to a “buy” rating. As well, she assigned a price target of $40, thus representing an almost 57% lift from Thursday’s close of $25.55. In fairness, the expert sees a wide range of profit and loss outcomes for 2024 and 2025. However, Andreeva is “constructive” on Beyond’s prospects for improvement.
Specifically, famed entrepreneur Marcus Lemonis — who was appointed as a director of the e-commerce firm last year — will represent the agent of change. Notably, Lemonis has put his money where his mouth is. In October, the corporate executive — who runs Camping World (NYSE:CWH) as CEO — bought several thousands of shares of BYON stock.
Per Andreeva, sell-side estimates on Beyond for 2024 EBITDA are down 200% in the last year. This dynamic pushes an urgency to create a more variable expense base aligned with an asset-light business under Lemonis. Given his expertise in adding value, Andreeva is confident in Lemonis’ leadership.
Upgrade on BYON Stock Puts Bears on Notice
Another element that may intrigue bullish speculators – while simultaneously pressuring short traders – is the prospect of BYON stock being forcibly squeezed higher. Effectively, optimistic contrarians may benefit from a two-pronged weapon.
First, as Seeking Alpha pointed out, short interest on BYON stock stands at just over 12% of the total float. That’s a data point that Fintel confirms. As Investopedia states, a short interest above 10% is fairly high. Also, the short interest ratio comes in at 4.43 days to cover. That means, based on average trading volume, bearish traders will need almost a full business week to unwind their positions.
To add more clarity, short interest deals with directly shorting the underlying security. In other words, borrowing the target stock, selling it, (hopefully) buying it back at a lower price, returning the cheapened securities back to the lender (broker) and pocketing the profit.
Second, another powerful element exists that could threaten to shoot BYON stock higher. Per Fintel’s options flow screener, short speculators began selling (writing) call options since late last year. In particular, on Dec. 4, the screener picked up big block transactions for the Mar 15 ’24 20.00 Call. That’s a contractual obligation that gives the call holder the right to buy BYON stock at $20 prior to the March 15 deadline.
However, the call writer must provide those shares. If the short position was partially or fully naked, that implies buying BYON at the higher open market price, only to sell at the far lower strike price of $20.
Why It Matters
For bearish traders, it’s vital that BYON stock avoid a feedback loop. If Andreeva’s forecast starts to come true, those directly shorting BYON may feel pressure to cut their losses. That means buying back shares now before they move even higher. And if that happens, the call writers will feel intense pressure due to the contractual obligation to have enough shares to sell at the strike price.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
