Beyond Meat Stock Soars as Short Sellers Continue to Feel the Pain - Barron's

Impossible Burger Photograph by Robyn Beck/AFP/Getty Images

The Beyond Meat short squeeze continues. Beyond Meat shares are up another $25, or 15%, in premarket trading to about $195 a share. That’s up an incredible 680% from the company’s $25 IPO price.

The inexplicable stock price run values Beyond Meat (ticker: BYND) for almost $12 billion, or about 56 times estimated 2019 sales and more than chicken producers Pilgrim’s Pride (PPC) and Sanderson Farms (SAFM) combined. Protein giant and Beyond Meat competitor, Tyson Foods (TSN) has a market value of more than $40 billion including debt and is expected to generate sale of $43 billion in 2019.

There appears to be no news driving the stock higher today, no new analyst reports that Barron’s can find. In fact, none of the analysts covering the company today rate shares Buy and the average Wall Street analyst price target is about $100 a share, almost 50% lower than current levels. A stock trading that far beyond Wall Street’s expectation is very unusual.

Today’s move could be driven by Monday’s announcement of a new ground beef replacement called Beyond Beef. News reports from Monday also indicated there may be shortages of Beyond competitor Impossible Foods “Impossible Burger.” Impossible distinguishes itself from Beyond by manufacturing heme, a substance found in protein responsible for the color and grill performance of traditional meat. The heme manufacturing process could be the production bottleneck, but Impossible Foods wasn’t immediately available for comment.

Product shortages could signal high demand or competitive missteps, but simpler explanation for Beyond Meat’s stock move is short sellers continue to get burned by the share price rally and are scrambling to cover short sales and end the losses.

Barron’s recently recommend investors avoid Beyond Meat shares, believing that shares had risen too far too fast. We still feel that way and think the share are incredibly risky for both long buyers and short sellers.

But a rocketing stock price isn’t all risk for the company. It can be a competitive advantage for a company. It gives a stock issuer, in this case Beyond Meat, the ability to pay for new technologies with shares instead of cash. Still, even industry participants may be wary of taking Beyond Meat stock in any deal at these prices.

Write to Al Root at allen.root@dowjones.com

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