The long-term bullish thesis for Beyond Meat (NASDAQ:BYND) stock is viable. Buying dips makes the most sense for BYND stock and investors can be confident doing it.
The debate around alternative sources of protein is often often lively. The opinions are very rigid from either side, but somewhere in the middle lies the truth. Therefore, it is not a surprise to see that BYND stock moves in leaps and bounds. Meanwhile, the business opportunity in providing alternative meats like this is very real.
Last summer I wrote about BYND and I stated that it had solid footing. It rallied 60% within two months and held that base for nine months. May was not nice to the bulls, but they have since recovered the neckline. The battle over the $122 zone rages on still. The stock is now about the same level as when I published my August 2020 article.
BYND Stock Rallies and Falls
On the surface it’s like nothing happened in BYND stock. Au contraire mon frere, it rallied and fell more than 50% five times. One of those was a 90% rally into the January 2021 highs. Clearly, the opposite of nothing happened – and it’s not likely to abate. Investors who brave it need either strong intestinal fortitude or solid conviction.
The stock came out of the blocks in 2019 and rallied 400% in a quarter. Unfortunately for the bulls, it immediately gave it all back up. The process restarted from the depth of the pandemic correction last year. The rally once again neared 400% and failed in January of this year. The 2021 correction for BYND stock was brutal. Those who braved buying the dip won big.
Last week, it spiked another 50%, and it has already fallen 15% from just under $150 per share. This violence in the charts is not right because the company’s financial performance is not iffy. Management has done a great job growing revenues consistently. The whipsaw in stock price, therefore, is from sentiment or unreasonable expectations. Investors would do well better if they focused on facts.
BYND stock has a price to sales ratio of 21. Although this is not cheap, it is not a red flag. For a growth company, valuation is not a problem at this point. This is especially true after what happened last year. The pandemic handed management an incredibly tough test. They passed with flying colors.
Their clients, the food purveyors of the world, ceased operations for months at a time. BYND had to shift focus toward the retail outlets. As we exit from the pandemic, life is coming back into commercial food preparers. Management can now recapture that business as well. This could open new doors and opportunities for BYND stock.
Unfortunately, Wall Street is rarely reasonable with its action on BYND stock. Selling it down to $100 per share as quickly as it did in May was wrong. Rallying as hard as they did to end the month was also wrong. Last week, when it was going into $150, was not an obvious entry point. These are shorter-term common-sense comments for those seeking favorable starting points.
My goal is never to perfectly time a stock, but to avoid the obvious potential mistakes. Getting long into a rally that has already delivered 50% in under a week is sub-optimal. For the midterm, the better entry point would be when it fades back toward $128. In the very long run, a few bucks are not going to matter much. But most of us would prefer to start on a good note and avoid immediate losses.
In the past when the stock fell big, investors who pounced won.
The Alt Meat Debate and BYND Stock
There is also the matter of the macroeconomic conditions. This week we will learn more about the U.S. job creation reports. If they come out too hot then wage inflation concerns will rise. This could force the Federal Reserve to start tapering its QE program sooner than 2023.
For about a year, stocks have had the largest tailwind ever. I fear that we will lack incremental catalysts going forward after these programs end. In addition, we are wrapping up another successful earnings season. The results have been very strong, so that added benefit has also passed. The next three months could be tricky for momentum stocks like BYND.
As for the debate over product viability, both sides need to be more flexible. There are legitimate reasons for seeking vegetable protein sources. The health debate is very valid. The moral argument is also honorable. And, the ecological aspect is fact. The alt meat critics shouldn’t hate the other side for wanting it. Conversely, the other side should tolerate the status quo a bit better. There isn’t one solution to fit all yet. Everything in moderation makes most sense.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Nicolas Chahine is the managing director of SellSpreads.com.