Beyond Meat (NASDAQ:BYND) continues to capture investors’ interest. After surging to almost $240 per share in July, the stock when on a cold streak. Shares continued to tick lower and just when it looked like Beyond Meat stock might really crack, the bulls came surging back.
Shares erupted over resistance and ran more than 80% as the stock price climbed from $75 to more than $135 in just a few trading sessions. As should be expected at this point, Beyond Meat stock remains as volatile as ever.
Partnership Potential
Beyond Meat stock has been on fire this month, but much of the catalysts have come from the headlines. For instance, innovations from privately held Impossible Foods sparked BYND’s rally earlier this month, as the company is pushing into plant-based meatless pork and sausage products.
To be fair, Beyond has already gone in this direction, and supplies it for breakfast sandwiches at some Tim Hortons and Dunkin’ Brands (NASDAQ:DNKN) locations. But as the industry continues to expand and gain momentum, so too does Beyond Meat.
Impossible Foods not working with McDonald’s (NYSE:MCD) due to supply constraints and McDonald’s expanding its pilot with Beyond also sparked a rally in BYND stock. So too did reports of Starbucks (NASDAQ:SBUX) exploring plant-based menu options.
These are big-time players in the fast-food and fast-casual space that could trigger plenty of long-term future demand. Of course, the risk is that consumer demand peters out, which is exactly what hurt Beyond Meat stock after such a hearty rally. News that Burger King will lower the price of its Impossible Whopper due to waning demand weighed on Beyond Meat stock on Wednesday, although the stock recouped some of its losses before closing lower by 5.25%.
At the end of the day, potential partnerships with Starbucks, McDonald’s and others would mean big business for Beyond Meat. But if the stock rallies aggressively before any deals are announced, it could lead to short- and intermediate-term disappointment, especially if no deal materializes.
Trading BYND Stock
Beyond Meat stock has surely minted some traders with a boatload of cash — and dealt swift blows to others. The stock has been a tough one to get a handle on, as you can see on the chart below.
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However, those that have gotten aboard the stock in the right direction have seen big-time payouts. Look at the latest run for an example. Shares ripped from $75 to $135 — an 80% rally — in six trading sessions. Two days later and BYND had shed almost 20%.
So, what now?
I’m looking at the $110 and $136 areas. The latter was notable support throughout the summer and has twice acted as resistance amid the current rally. If Beyond Meat cannot reclaim this zone, lower prices may be in order.
As for $110, this level marks the backside of prior downtrend resistance (blue line) and was (roughly) the breakout level from the stock’s short-lived consolidation phase this month (purple wedge). Below $107 — the consolidation zone low — and $100 or lower may be on the table.
It’s very important to use discipline with a stock like this. If you don’t have discipline, don’t touch Beyond Meat stock!
Bottom Line on Beyond Meat Stock
Beyond Meat stock isn’t unlike cannabis stocks. That is to say, the valuation based on today’s numbers is just silly and the price action is simply erratic and unpredictable. But investors who believe in its long-term potential may justify a position in this speculative play.
I say speculative because of the volatility and how unpredictable its industry may be. I personally think meatless products have a market, but I’m not sure how big that market is. Or how big it will become in two years, five years or ten years. Does it remain a niche category or does it become widespread?
It’s too hard for me to tell.
Beyond has reported three out of its four fiscal quarters for 2019. While analysts expect it to lose 18 cents per share for the year, they call for a turn to profitability in 2020. Consensus estimates call for earnings of 41 cents per share next year. That’s on a 74% gain in sales to $488 million.
So far, Beyond Meat stock has beat on earnings and revenue estimates in all three of its public earnings reports. If — and this is a big if — Beyond Meat can deliver on profit in 2020 and hit $500 million in sales, bulls may be able to maintain momentum and give the short-sellers a good squeeze.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long SBUX.
