(Not a teacher.)
A word can mean whatever its speaker wishes it to mean (although it helps if his audience understands it to mean the same).
Why in some circles "bad" has adopted this meaning I do not know.
That said, if you click on the "Dictionary" tab in the top left-hand corner of the webpage to which you linked and search for "bad", the final adjective definition of the first listing (no. 36) confirms this meaning.