Broker sees big upside on Baby Bunting - $3.70 target, page-23

I note that market retail favourite Lovisa is down almost 28% over the past three weeks, including 5.2% today alone on no news. Retail focused REITs were sold off today too.

BBN has rightfully been sold off heavily after a horrible announcement. I had quietly suspected the second half wouldn't be quite as positive as BBN had forecast, but would be somewhere around the mark nonetheless. However the announcement two days ago was not good. Here was I thinking baby items were fairly non-discretionary and BBN was the category leader. As I've said previously, I've been wrong about this stock from the beginning. My only saving grace is buying a small number of very small parcels.

In my case, I'm still building a position and happy (not exactly 'delighted', but more like 'willing'!) to hold. The company was founded in 1979 and has been through these cycles. I guess this is why it's called a cyclical stock. We're finding out the hard way just how cyclical it really is. I figure the damage has already been done. The time to sell was a couple of weeks ago. The horse has already bolted, so to speak. I ask myself now whether BBN is really overpriced at current levels or has been over-sold? At the moment, at least some of the weakness is sentiment, which will change.

I like the reported BBN financial numbers and ratios year-by-year on Commsec, and the growth/store roll out plan. There's a lot to like about Baby Bunting. A lot, aside from the share price performance, of course. I like that the number of shares on issue hasn't blown out since listing. I like the bios of the BBN executives on their investor website. Seasoned, experienced retail professionals.

At some point, and I'd hope that point is right now, every possible bad outcome will have been priced in. It can't fall forever. I reject flippant calls of "BBN will go to $1", or 75¢ or whatever other random number is thrown out. Maybe it *will* go to $1. But that's no vindication for the "it will be at X¢ per share next week" crew. Low value comments. Again, maybe it will drop a lot further. I have no idea. Neither does anyone else. Nobody expected high P/E Lovisa to sell off so much.

My thesis now is retail stocks in general will rebound when rates are cut. That needs inflation to fall as a result of reduced spending. We're seeing that already. What with mortgages, energy bills, and higher prices, there's not a lot of spare money to go around. Another six months? Twelve? No clue... A waiting game. Dividends cut.

It's always the way that one sits and watches stocks like BBN (or Xero, or PLS last year) for example) hoping for a sell off to allow a cheap entry point. But when it actually happens, buying the shares never seems like a very good idea!

This from Sky News tonight forecasting a slow, but gradual recovery:



Two forces at work:





Good luck to all long term holders.