Shares of Beyond Meat (NASDAQ:BYND) have certainly lost their sizzle lately. The BYND stock price is now down over 50% from the all-time highs of $235 in late July. Beyond Meat stock is down 32% just this month alone as the looming lock up expiration on Oct. 29 weighs on the stock.
Undoubtedly some of the selling was warranted given the ridiculous rally that preceded the nasty drop. The selling has gone too far, too fast, however. Time to be a buyer of Beyond Meat stock on any further weakness.
Beyond Meat Stock Tailwinds
JPMorgan raised Beyond Meat from a neutral to overweight rating back on Aug. 19. Analyst Ken Goldman found BYND stock “appealing again” after a 40% drop from the all-time highs at the $225 area. He also notes the cash on hand of $30 million and a potential guidance increase as further catalysts.
BYND stock initially jumped on the upgrade back above $150. Since then it has fallen another 30% to close at $106.40. Certainly BYND stock is even more appealing at current levels.
Beyond Meat also got some good news out of Canada as McDonald’s (NYSE:MCD) will begin testing Beyond Meat burgers in 28 restaurants. This could lead to further adoption down the road. Other major fast food restaurants, such as Carl’s Jr., Subway, and Yum! Brands‘ (NYSE:YUM) KFC, are also partnering up with Beyond Meat to add meatless items to their menus. Vegetarian choices are a must-have now for fast food chains to attract the younger age groups who value health and sustainability. Once again, BYND stock popped on the positive McDonald’s news only to fall to fresh recent lows.
Large grocery chains such as Kroger (NYSE:KR), Safeway, Publix, Target (NYSE:TGT) and Whole Foods have added a new meatier version of Beyond Burger to the mix which should increase already red-hot sales. The Wall Street Journal recently noted that Beyond Meat couldn’t keep up with demand for their products.
The company added a new plant in Missouri and has partnered with other food makers to meet the demand. BYND CEO and co-founder Ethan Brown expects this ramp up to eventually lower production costs through larger scale. Mr. Brown feels that Beyond Meat products will be able to match the price of ground meat within five years.
Beyond Meat stock is extremely oversold on a technical basis. 14-day RSI is at the lowest level ever with a reading near 20. MACD is fast approaching historic lows as well. Bollinger Percent B is barely positive. Detrended Price Oscillator is also at a extremes of pessimism. Shares are at a big discount to the 20-day moving average. All in all, doesn’t get much gloomier than this. Which from a contrarian standpoint is a bullish sign.
BYND Stock Chart
BYND stock has closed the post earnings gap on the chart at the $105 area, which is a positive sign going forward. This should provide some badly needed support for Beyond Meat stock after such an unrelenting sell-off. Earnings are due Oct. 28 with expectations of a 5 cents in EPS on $77 million in revenue. The growth story will likely continue for Beyond Meat.
Stock traders should look to buy BYND stock on any further weakness. A move back to the upper end of the price gap at $125 is the initial upside target. A meaningful break of secondary support at $75 would make for a viable stop out level. Selling a January $120 covered call at $5 would further reduce the cost while pre-positioning to be a seller at the $125 level.
Option traders may want to take advantage of the fact that BYND stock is hard to borrow. This means that puts carry a much higher level of implied volatility than calls. Buying the January $100 calls and selling the January $100 puts for a $2.50 net credit effectively buys BYND stock at $97.50- a $8.90 discount to the $106.40 closing price of BYND.
Tim Biggam may hold some of the aforementioned securities in one or more of his newsletters. Anyone interested in finding out more about Tim and his strategies can go to https://marketfy.com/item/options-and-volatility.