The appetite for Beyond Meat's plant-based burgers may be wavering, but the enthusiasm for its stock is anything but. In a remarkable turn of events, shares in Beyond Meat have skyrocketed over 1,000% in just four days—an astonishing rally for a company whose share price had nearly collapsed since its public debut six years ago. Despite ongoing struggles with sluggish sales and a lack of quarterly profits for over five years, this sudden surge has reignited discussions about whether this activity is indicative of an excessively frothy stock market.
On Wednesday, Beyond Meat shares experienced a dramatic surge of up to 112%, extending gains from the previous three trading sessions and briefly pushing the stock price above $7. However, the excitement was short-lived, as the stock closed down approximately 1%, settling around $3.60 after a day of volatile trading. The momentum began to build last week when a user on the social media platform Reddit ignited a wave of purchases, drawing parallels to previous rallies seen with popular meme stocks like GameStop and AMC.
The momentum continued when Roundhill Investments included Beyond Meat in its meme stock ETF on Monday, which appeared to trigger a short squeeze. As the stock price climbed, many investors who had bet against the company were compelled to purchase shares to mitigate their losses. Adding to this frenzy, Beyond Meat announced a distribution deal with Walmart on Tuesday, further propelling its share price upward.
"This company was essentially thought to be going out of business not that long ago," stated Mark Hackett, chief market strategist at Nationwide. He emphasized that securing a positive catalyst like the Walmart deal could be transformational, especially with the potential rebound in demand and improved consumer access to products. "That is absolutely the trigger," he noted, referring to the stock surge that began last Friday.
Despite this optimism, Hackett warned that the deal with Walmart does not resolve all of the company’s underlying issues. "You're really trading on emotions and technicals, versus fundamentals," he cautioned, highlighting that the company remains on uncertain ground. Notably, Beyond Meat's current share price is still significantly below its all-time high of over $230 reached in 2019.
The surge in Beyond Meat's stock coincides with broader concerns about an overvalued stock market. Analysts are particularly wary of a potential bubble forming in the artificial intelligence (AI) sector, as they grapple with understanding how the substantial investments made by industry giants align with market realities. JP Morgan Chase's CEO, Jamie Dimon, recently expressed heightened concerns about the possibility of a serious market correction occurring within the next six months to two years.
The Securities and Exchange Commission has also raised alarms about potential market manipulation associated with meme stocks, cautioning everyday investors about the inherent risks. In response to these concerns, some have called for stricter regulations on short selling and trading driven by social media. However, there has been little indication that such proposals are gaining momentum in the current regulatory landscape.
