Although today’s rally comes after some significant selling in the stock, it is still impressive and eye-catching. Is confidence in Beyond Meat’s comeback rising again, or will the passage of time reveal that today’s gains were little more than a hype-induced flash in the pan?
Image Source: Getty Images.
Beyond Meat is on the rise as memes pick up again
Beyond Meat stock has been highly volatile in recent months, with the stock briefly experiencing a massive valuation increase thanks to the support of meme-stock traders before coming back down to earth. Now, it looks like another near-term rally is taking hold.
Investors largely adopted a risk-off trade in the daily session, as reflected by the substantial decline in valuations across the major indices today – but that didn’t stop Beyond Meat and some other big-name meme stocks from banking significant rallies. Gamestop The day ended trading in the green and is now up about 13% compared to the last week of trading.
According to its last quarterly report, Beyond Meat’s sales declined 13.3% year over year to $70.2 million. The business recorded a loss of $110.7 million and a gross-profit margin of 10.3% in the period. The company ended the quarter with total cash and equivalents of $131.1 million and total long-term debt of $1.2 billion.
,36.48,0.36
current price
,1.34
key data points
$1B
day limit
,0.93 ,1.48
52wk range
,0.50 ,7.69
volume
6.5M
average volume
185m
gross margin
5.98,
dividend yield
N/A
Should investors buy or short Beyond Meat stock?
Beyond Meat will likely be able to cut some of its operating expenses by reducing its labor force and pursuing other efficiency initiatives, but the long-term outlook for the business is still dire unless the company can significantly improve its gross margins. With the business burning through cash at a rapid rate, Beyond Meat may be at risk of bankruptcy within the next several years. On the other hand, that doesn’t mean the stock couldn’t see more explosive rallies in the near term.
In October, Beyond Meat’s share price rose from $0.52 per share to $7.69 per share in the span of one week. News that the company has signed an agreement to expand its partnership wal-mart played a role in the rally, but buying by meme stock traders and investors aiming to trigger a short squeeze were the bigger catalyst.
Beyond Meat’s big valuation gain today appears to be uncorrelated to material changes to the underlying business. Taking a long-term position in Beyond Meat looks risky right now, but that doesn’t mean betting against the stock with a short position would be a smart move. As the stock’s huge but short-lived rally last month showed, the bullish momentum generated from meme-stock trades can be enough to inflict painful losses on those holding short positions.
Keith Noonan has no positions in any stocks mentioned. The Motley Fool has positions on Beyond Meat and Walmart and recommends it. The Motley Fool has a disclosure policy.
<a href=