Every once in a while we get a stock that hogs the headlines and lights up Wall Street. This year we were lucky to have several like Uber (NYSE:UBER) and Lyft (NASDAQ:LYFT) who came to market earlier this year. But this week the superstars are Beyond Meat (NASDAQ:BYND) and Zoom (NASDAQ:ZM) as they report their first earnings as public companies. Beyond Meat stock especially has captured the attention of investors and main street alike.
BYND stock came into earnings already up 140% since it’s first day low, so clearly this is a momentum stock. This makes it a problem for traders. When stocks are rising this fast they perpetually seem like they’ve gone too fast too far. This has shades of Tilray (NASDAQ:TLRY). So let that serve as a word of caution and context to consider through my write up today.
The Beyond Meat stock hype is a massive storm and it’s in the media streams on a daily basis. Last night the company reported earnings and the stock is soaring 24% on the headline. It is now a three digit stock in mere weeks.
To their credit, management delivered a strong earnings report. They beat all the metrics that matter. But most importantly they showed tremendous 200% year/year growth on the top line while growing their operating margins 400%. So they left nothing for the bears to sink their claws into.
They proved that they are a growth company that delivers on its promise without expanding its losses. In fact they claim they can become EBITDA profitable by year-end. It will come down to capacity. Management also noted that they tripled manufacturing capacity. So the story resembles that of the Cannabis stock investment.
They can’t make the stuff fast enough! This is not a concept I want to short even if it’s the right thing to do.
Is It Too Late to Buy Beyond Meat Stock?
The answer is complicated and depends on investor time frames. The concept of fake meat is intriguing. Most meat lovers resented the notion of a product that wants to replace meat. But the idea of Beyond Meat is much more than fake stuff.
There are millions of people who choose to not eat meat for moral reasons. They prefer to abstain from contributing to the harm of animals and the planet. Experts contend that raising cattle for the purpose of making them food is a leading cause killing the ozone.
So there are valid arguments on both sides of the Beyond Meat burger discussion. It’s not just whether it’s healthier or not, or if it tastes exactly like meat or not.
So the debate is complicated and from an investing perspective, this confusion makes shorting beyond meat concept even more difficult. The bullish thesis is hard to kill in a short period of time. Much like Tesla (NASDAQ:TSLA) and Netflix (NASDAQ:NFLX) were in their early days. Uber and Beyond Meat stock now have similar bullish positions where their future doesn’t depend on one specific application. So the naysayers can shoot down one aspect of the bullish thesis, but there are dozens of others to still hang hope on.
Simply put, there is a ton of hype around alt-meat products and Beyond Meat is its poster child. Last night management killed it with their earnings so they left nothing for the doubters to sell. They proved that they are successfully executing on growth plans without bleeding losses.
So is it a good stock to buy? Yes, but only if as a speculative long-term bet on the industry as a whole. Meaning, I plug my nose and I buy the stock and I don’t worry about the short-term gyrations.
Yes, there are competitors, but I bet there is enough room for most of them to thrive. I know I am buying an overvalued stock with the current income levels. But if there were no risk then there would be no reward.
Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. Join his live chat room free here.
