Watch Bed Bath & Beyond Stock for Extreme Near-Term Volatility

After a parabolic rise, shares of Bed Bath & Beyond (NASDAQ:BBBY) tumbled after GameStop (NYSE:GME) Chairman Ryan Cohen divested all of his stake in Bed Bath & Beyond.

Also, the company plans to hold a conference call with a “strategic update” on Aug. 31. However, this could be a hit-or-miss event and could push BBBY stock higher or lower. Ultimately, there’s too much volatility and uncertainty here for most investors to handle properly.

Maybe you’ve heard about the 20-year-old college student who generated $100 million in returns trading Bed Bath & Beyond shares. It’s exciting to consider that a non-professional investor could make life-changing money with just one stock.

That’s the appeal of trading meme stocks. Yet, the thrilling get-rich-quick stories don’t always reveal the dark side of the meme-stock trade. What goes up fast can come down just as quickly – and if Bed Bath & Beyond isn’t a financially sound business, then most investors might choose to watch the action from the sidelines.

The Rise and Fall of BBBY Stock

Apparently, some Reddit traders decided to revive 2021’s meme stock trade in 2022. This summer, they pushed the share prices of Bed Bath & Beyond, GameStop and other meme favorites to astounding short-term highs.

This time around, BBBY stock managed to reach $28 before collapsing back to $8 and change. What prompted the post-pop sell-off? Ironically enough, it was a famous meme-stock cheerleader who set the downfall in motion.

The rally came to a screeching halt when it was revealed that Cohen, GameStop’s chairman, sold his entire stake in Bed Bath & Beyond for $178 million. He may have profited handsomely, but some folks who bought into the meme stock hype at the wrong time were left holding the bag.

Bed Bath & Beyond’s Conference Call Might Not Boost the Stock

Meanwhile, some folks might be counting on Bed Bath & Beyond’s upcoming Aug. 31 conference call to catalyze the stock. Yet, the “strategic update call” might turn out to be a major disappointment.

Remember, this isn’t a company that’s thriving financially. During fiscal 2022’s first quarter, on a year-over-year (YOY) basis, Bed Bath & Beyond’s net sales dropped 25%. Furthermore, the company’s gross margin fell 850 basis points, and its net earnings loss widened from $51 million to $358 million.

On top of all that, S&P Global Ratings analysts downgraded Bed Bath & Beyond’s credit rating from B-minus (already in junk territory) to CCC (even further into junk territory). Furthermore, Wedbush analysts warned of “a fast downward spiral” and “bankruptcy risk” for Bed Bath & Beyond.

So, it’s hard to imagine what miraculous things Bed Bath & Beyond’s management would say or do during the upcoming conference call. If they don’t knock it out of the park with something spectacular, a disappointment-fueled share-price decline may ensue.

What You Can Do Now

Jeremy Siegel, professor emeritus of finance at the University of Pennsylvania’s Wharton School, made an interesting suggestion. It might be okay to allocate 10% to 15% of one’s portfolio to meme stocks, he proposed.

That allocation size – especially 15% – is probably too much, though. This year, just like last year, BBBY stock has been extremely volatile. It’s just too unpredictable, and divorced from the company’s fundamentals, to be appropriate for most investors. Therefore, it’s perfectly fine to take a much smaller position than 10% or 15%, or to simply watch without investing at all.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.