Bed Bath & Beyond Inc. (NASDAQ: BBBY) has been beaten up so far this year, but as many retailers are starting to see an inflection point in their stocks, there could be hope this year for this firm. In fact, one analyst thinks that Bed Bath & Beyond has the potential to rally 50%.

Wedbush reiterated a Buy rating with an $18 price target, implying an upside of 57.6% from the most recent closing price of $11.42. At the same time, Wedbush added Bed Bath & Beyond to its Best Ideas List.

The boutique brokerage firm said that this stock continues to trade at distressed levels despite the company turning the corner to positive comps in recent months and being on the cusp of a dramatic improvement in profitability.

Wedbush also said that Bed Bath & Beyond is poised to generate at least $700 million of earnings before interest, taxes, depreciation and amortization in two to three years, yet its Pro-forma enterprise value is only twice that level. Clearly, many analysts do not believe in this potential transformation, arguing that comps are only positive because of an unsustainable coronavirus-related demand surge and that Bed Bath & Beyond is a beleaguered home goods chain.

However, Wedbush said it begs to differ with most other analysts:

In fact, as we detail inside, we see a path to nearly $850m in EBITDA in 2022 using conservative estimates. There is clear line of sight to $235 million of SG&A cost reductions, while an increasing mix of private label merchandise, a shift to direct sourcing and centralized buying could easily drive another $270 million of EBITDA improvement from the $465 million base in 2019. Undoubtedly, sustaining comparable sales growth is critical to the outlook, and we see continued growth ahead as the company not only benefits from a shift in discretionary spending to home goods that should persist, but also gains traction with improved merchandising, value communication and inventory planning to drive sales under the leadership of new CEO Mark Tritton and his highly qualified team; as a well-known national retailer, BBBY has the opportunity to much better convert strong traffic to sales.

Additionally, Wedbush sees upside in the near term as back-to-school sales declines prove overblown against an easy comparison, a sales timing shift and continued strength in online traffic as consumers increasingly turn to the retailer online.

Wedbush concluded its report saying this:

While no retail transformation is linear, we expect this story to build with the company’s fiscal second quarter earnings report on October 1, followed by a mid-late October analyst meeting roadmapping the forthcoming transformation and then stronger holiday sales buoyed by strong demand and supported by key initial inventory, pricing and merchandising changes against easy comparisons. Additional asset sales and return of capital to shareholders should also occur by year end.

Bed Bath & Beyond traded up about 7% on Thursday to $12.27, in a 52-week range of $3.43 to $17.79. The consensus price target is $10.62.

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