What Is the Outlook for Bath & Body Works Shares?

One of the standouts of today's afternoon trading session was Bath & Body Works, which logged a 3.4% performance and outperformed the S&P 500 by 2.7%. The Specialty Retail stock is now trading at $34.2 per share and may still have upside potential because it is still -29.75% under its average target price of $48.68. Analysts have set target prices ranging from $40 to $72 dollars per share, and have given the stock an average rating of buy.

We can use Bath & Body Works's short interest as a proxy for determining general market sentiment regarding the stock. The short interest is the percentage of the share float that represents short positions, meaning that the investor believes the stock will decline in the future. Since BBWI's short interest is 7.8%, the market sentiment is mixed on this stock.

Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.

One way to get an idea of the market sentiment on a stock is to check its rate of institutional ownership. In the case of Bath & Body Works, institutional investors own 97.4% of the shares. This would indicate a positive sentiment towards the stock among institutions. What does this really tell us?

Institutional investors such as hedge funds, investment firms, and wealth managers devote significant resources to identifying good investments. If they have decided to invest in BBWI, it probably means they believe it is a solid investment choice. But it could also mean they are buying up shares in an effort to acquire the company or get seats on the board of directors. Also bear in mind that institutions are fallible (just maybe not quite as fallible as the average retail investor), so they may simply be wrong when they think they've found a good stock.

Overall, there is exuberant market sentiment on Bath & Body Works because of its an analyst consensus of strong upside potential, a buy rating, an average amount of shares sold short, and a significant number of institutional investors. Warren Buffett famously said that in the short term, markets are voting mechanisms, but in the long term, they are weighing mechanisms. This means that long term investors should be aware of a stock's fundamentals before committing.

Buffett was one of the fist investors to focus on free cash flow as a yardstick for a company's health. Here are BBWI's recent cash flows:

Date Reported Cash Flow from Operations ($) Capital expenditures ($) Free Cash Flow ($) YoY Growth (%)
2022-01-29 1,492,000,000.0 -270,000,000.0 1,222,000,000.0 -32.52
2021-01-30 2,039,000,000.0 -228,000,000.0 1,811,000,000.0 132.78
2020-02-01 1,236,000,000.0 -458,000,000.0 778,000,000.0 4.01
2019-02-02 1,377,000,000.0 -629,000,000.0 748,000,000.0 n/a

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The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.