Bed Bath & Beyond Stock Forecast: BBBY soars 40% on Ryan Cohen out-of-the-money calls

• BBBY stock up more than 40% on Wednesday's premarket.
• Bed Bath & Beyond stock has gained 300% in past month.
• GameStop chairman Ryan Cohen purchased 16,000 call contracts.

Bed Bath & Beyond (BBBY) stock is up 31% at $27.22 in Wednesday's premarket a day after it was disclosed that major investor Ryan Cohen had purchased at least 16,000 call contracts on BBBY with strikes above $60. BBBY stock advanced 29% on Tuesday to $20.65. The meme stock is up roughly 300% over the past month despite the fact that many analysts believe the home goods retailer is headed for bankruptcy.

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BBBY stock news

So what is the deal with Ryan Cohen? Cohen, the savior of Chewy (CHWY) and chairman of GameStop (GME), has become the most high-profile backer of meme stocks. Cohen is very much seen as a retail whiz kid after he was able to turn around Chewy.com. 

Cohen's 16,000 call options, expiring in January 2023, have strike prices between $60 and $80. This would require an immense short squeeze, possibly the Mother of All Squeezes to borrow a phrase from the AMC apes. These could only be cashed out if BBBY stock rises on the order of at least 300% to 400%, although it is possible he could sell them as they are already rising in value quickly. The options purchases were made through Cohen's RC Ventures investment vehicle.

Cohen was already reported as owning more than 11% of BBBY back in March, and much of his purchases were estimated to be made above $20 a share though the stock has fallen below $5 in recent months before the recent surge in popularity. The retailer lost about $224 million in operating income during the fiscal first quarter and reported only $107 million in cash. Loop Capital gave the struggling retailer a $1 price target earlier this month, saying that it was headed the way of Sears.

BBBY stock forecast

BBBY stock has already reach the area of resistance from March between $28 and $30 in Wednesday's premarket. Above there sits the $39 to $40 region of resistance from June 2021. June 2, 2021 saw a high of $44.51. After that is only the January 27, 2021 high of $53.90 during the first wave of meme stock hysteria. For Cohen's call options to be triggered, BBBY stock needs to climb about 60% above that January 2021 high. The stock's all-time high is at $80.82 from January 2014. Just since July BBBY stock has gone from oversold to overbought on the Relative Strength Index (RSI).

BBBY daily chart