Plant-based meat maker Beyond Meat (NASDAQ:BYND) is not an enticing long-term investment for conservative market participants. The company has consistently lost money. In addition, after posting revenue of $464.7 million in 2021, it has seen sales growth erosion. That’s not what you want to see for an industry that’s expected to blossom. Still, BYND stock could be a quick scalping opportunity for the contrarian trader.
Fundamentally, Beyond Meat should perform better than it has. Since the start of the year, BYND stock has dropped almost 19%. In the past 52 weeks, it slipped more than 44%. Those aren’t encouraging stats, not when Grand View Research is projecting that the global plant-based meat market could be worth $24.8 billion by 2030.
In 2022, experts reported that the sector reached a valuation of $4.4 billion. So, a move to $24.8 billion would imply a compound annual growth rate (CAGR) of 24.9%. But as I mentioned, Beyond Meat has seen its sales growth decline over the last two years.
To reiterate, BYND stock does not make for a comfortable long-term investment. It could, however, make for an enticing short-term trade.
High Short Interest Could Panic the Bears
One of the intriguing dynamics about BYND stock is that options traders appear slightly bearish on the idea.
According to Barchart’s options flow screener – which exclusively filters for big block transactions likely placed by institutional investors – the net trade sentiment for BYND options during the June 24 session came in at $21,400 below breakeven. In other words, the wagers slightly leaned bearishly.
However, among options with bearish sentiment, the biggest premiums centered on options with expiration dates of Aug. 16 or later. The rest of the pessimistic transactions mostly featured expiration dates of June 28, which is this Friday. As well, the strike prices range between $6 and $10.
As mentioned above, it’s no surprise that many folks are betting against BYND stock as a long-term investment. But betting against it in the short term? That’s risky because of the underlying high short interest. According to Fintel, this metric stands at 39.09% of the float. Further, the short interest ratio – or the time needed for the bears to exit their entire positions – clocks in at 13.22 days to cover.
All it may take is a sudden upward price movement to panic out the weak-handed bears. Subsequently, the act of covering a short position involves buying back the underlying equity. Of course, that would be exceptionally bullish for those who are (temporarily) long BYND stock.
Trade of the Day: Go Contrarian on BYND Stock
With the above framework in mind, today’s trade of the day is straightforward: Buy BYND stock in the open market.
By going contrarian, you can potentially help squeeze out the bears, who may panic out of their positions. Doing so may create a positive feedback loop that could inspire more short covering, thus driving up shares.
One could also take a leveraged bet with call options. One high-risk, high-reward idea is to consider 19 July 2024 $7 calls. With an expiration date 3.5 weeks from now, traders will have some time for BYND stock to rise above the $7 strike. Further, the 7.69% bid-ask spread, while wide compared to high-volume options, is decent for how speculative this transaction is.
A final word of caution, though. Should BYND stock explode higher, you may want to consider booking those profits. With the company having lost almost 96% of value in the past five years, sustainability risks run hot.
On the date of publication, Josh Enomoto 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.
