The Fed’s formal announcement of the start of tapering for pandemic-era asset purchases midday Wednesday left the stock market in a temporary state of indecision, options activity on some newly categorized “meme” stocks is gaining serious momentum.
Three stocks started soaring before the closing bell on Tuesday and continued their upward trek Wednesday, on a combination of factors varying from positive corporate announcements, a sudden burst of retail investment interest and a short-seller squeeze.
#1 Bed Bath and Beyond (NASDAQ:BBBY)
Bed Bath and Beyond is still benefiting from its “meme stock” status, even though the company’s management is insistent upon avoiding the volatile label. .
Last week, shares plunged on rather disappointing earnings, resulting in the stock losing all the momentum it had gained from the meme-stock rally earlier this year.
On September 30th, BBBY shares fell 22% after the company slashed its revenue and earnings outlook due to supply chain challenges.
Bed Bath & Beyond cited escalated costs over the summer months, eating into sales and profits, with the combined pain of a decline in shopper traffic--all of which saw revenue drop 26% to $1.99 billion from $2.69 billion a year earlier.
However, after-hours trading Tuesday the stock soared as much as 80% after the company shared the news that likely fueled a lot of activity. Bed Bath & Beyond announced a partnership with Kroger, noting that some of its home and baby products will be available in various supermarket giant stores.
The company also completed $600 million in share repurchases since the end of last year and will buy back another $400 million by the end of 2021–two years ahead of schedule.
On top of that, BBBY has introduced several private-label brands recently.
Last April, Bed Bath & Beyond said that roughly 25% of its stores in the U.S. and Canada would be turned into temporary fulfillment centers. However, as the economy has re-opened, the company has been remodeling its locations.
#2 Avis Budget Group Inc (NASDAQ:CAR)
Shares of major vehicle rental company Avis more than doubled after third-quarter results showed that the company is traveling the pandemic recovery road at a fairly fast clip.
The stock was up as much as 218% at one point and the trading was halted a few times due to volatility. About 21% percent of Avis Budget’s free float shares are shorted right now. By the end of Wednesday, the stock had lost over 16%.
According to data from S3 Partners, the increase pushed losses for short-sellers on the day to nearly $5 billion.
Even though JPMorgan analyst Ryan Brinkman downgraded shares of Avis Budget to ‘Sell’ from ‘Buy’, S3 Partners reported that the stock is likely to remain a target for a short squeeze.
The market mostly reacted positively about the Avis management announcement of the possibility that the company could add more electric vehicles to its fleet. Just a few days ago, rival company Hertz announced that it struck a deal with Tesla to buy some of its vehicles.
Avis Budget, along with other rental companies, started benefiting recently from an increase of travel as millions of Americans restart vacations and resume business trips.
#3 Arista Networks Inc (NYSE:ANET)
California-based Arista Network shares rose 25% after hours Tuesday after reporting better than expected Q3 financial results but also as it provided strong fourth-quarter guidance. Wednesday continued gains.
For the Q3, the cloud-software company earnings per share rose 22% compared to a year earlier. Revenue grew 24% to nearly $750 million, beating forecasts for $738 million. Since the start of this year, Arista’s stock price has gone up 75%.
For Q4, the company expects revenue of $775 million to $795 million. For the fiscal 2022, the company expects forecast revenue growth of 30% as data center orders pick up from Facebook.
Arista said it expects $400 million in corporate campus sales next year, up about 100%. Its rival Cisco Systems also expects strong demand in the corporate market.
The company also expanded its stock buyback program by $1 billion.