The appetite for Beyond Meat’s plant-based burgers is fragile. But traders seem to have developed a taste for his actions.
The company’s shares soared more than 1,000% in four days – a stunning rebound for a company that had seen its stock price virtually wiped out since its stock market debut six years ago.
The company is struggling with slow sales – and hasn’t posted a quarterly profit in more than five years – as shoppers turn away from its meat alternatives.
The rise has reignited debate over whether this activity, spurred in part by online enthusiasm from ordinary investors, is a sign of an overly frothy stock market.
Beyond Meat shares rose 112% on Wednesday, extending gains from the previous three trading sessions and briefly sending its stock price above $7.
But the rally faded after a volatile day of trading, and the stock ended down about 1%, closing at around $3.60.
Momentum began to take shape last week, when a Reddit user helped fuel a buying spree, drawing comparisons to other rallies in so-called meme stocks such as GameStop and AMC.
The gains continued after Roundhill Investments on Monday added the company to the group of companies held by its meme stock ETF, or exchange-traded fund. The move appears to have triggered what is known as a short squeeze: As the stock price rose, the many investors betting against the company were forced to buy shares to cover their losses.
The company also announced a distribution deal with Walmart on Tuesday, strengthening its stock.
“It wasn’t that long ago that we thought this company was going to go bankrupt,” said Mark Hackett, chief market strategist at Nationwide.
“Getting a positive catalyst like the Walmart deal, which could be transformative with demand rebounding and products getting into the hands of consumers – that’s absolutely the trigger,” he added, referring to the rise in inventories since last Friday.
But Mr. Hackett cautioned that the deal with Walmart to expand distribution “doesn’t necessarily solve all the problems.”
“You’re actually trading on emotions and technicals, rather than fundamentals,” Mr. Hackett said.
The company remains on shaky ground. Its stock price remains well below its all-time high of over $230 in 2019.
Beyond Meat’s stock surge comes amid nervousness about an overvalued stock market.
At the forefront are concerns about the emergence of a possible bubble in the artificial intelligence (AI) sector. Those concerns have intensified as analysts struggle to see how the huge sums of money the biggest players are trading among each other fit together.
JP Morgan Chase boss Jamie Dimon echoed these concerns this month. He told the BBC he was “much more worried than others” about a serious market correction, which he said could come within six months to two years.
The Securities and Exchange Commission has also noted possible market manipulation related to meme stocks, warning of risks for everyday investors.
Some responded by calling for stricter rules on short selling and social media-fueled trading. But there is no sign that such proposals are gaining traction.
