Beyond Meat: Why this strategist has 'no interest' in this meme stock

Key Concepts

• Meme Stock: A stock that experiences a significant price surge driven by social media hype and retail investor interest, often detached from the company's underlying fundamentals.
• Short Squeeze: A market phenomenon where a heavily shorted stock experiences a rapid price increase, forcing short sellers to buy back shares to cover their positions, further driving up the price.
• Total Addressable Market (TAM): The total revenue opportunity available for a product or service.
• ATM Setup (At-the-Market Offering): A method for a company to sell shares of its stock over time at prevailing market prices.
• Casino Stock: A stock whose price movements are driven by speculation and gambling-like behavior rather than fundamental value.
• Tokenization: The process of representing ownership of an asset digitally on a blockchain.

Beyond Meat: A Meme Stock Phenomenon Amidst Fundamental Weakness

The transcript discusses the recent surge in Beyond Meat's stock price, characterizing it as a "meme stock moment" despite the company's deteriorating financial fundamentals.

Key Points and Details:

• Stock Performance: Beyond Meat shares have seen gains of close to 600% in the past three trading sessions, with further increases of up to 135% in pre-market trading on Wednesday. This surge is attributed to a "wild move" and a spike in interest among retail investors, as indicated by community tools.
• Fundamental Weakness: The transcript emphasizes that Beyond Meat's business fundamentals are not "sizzling." Sales are described as "plunging" and declining by double digits. The company is also posting "big operating losses."
• Market Size Concerns: There are indications that the size of the plant-based meat market is "not panning out to be as big as once believed."
• Historical Context: The stock, which peaked above $200 per share upon its IPO in 2019, had fallen to less than $1 for a significant period before this recent surge. It was trading around 56 cents just a week and a half prior to the discussion, following a "pretty large debt swap deal" that was poorly received.

Analysis of the Meme Stock Phenomenon

Art Hogan, a participant in the discussion, provides insights into the drivers and implications of these meme stock movements.

• Short Squeeze Mechanism: Hogan explains that the current surge in Beyond Meat is a "classic short squeeze" orchestrated by a "gang" of investors. These groups target specific stocks, often those with a high short interest.
• High Short Interest: Beyond Meat reportedly has a short position of 64-65%, making it susceptible to a short squeeze.
• Psychology Behind the Moves: Hogan questions the psychology behind these moves, noting that readily available financial statements on SEC.gov clearly show the company is "ain't making money" and experiencing declining sales.
• Dangerous Trading: Hogan advises against trading Beyond Meat in this scenario, calling it "dangerous" and not something he would play. He likens these stocks to "casino stocks" where trading is based on betting rather than fundamentals or strategy shifts.
• Company's Opportunity: The only way a company can benefit from such a mania, according to Hogan, is to have an "ATM setup" to sell shares and raise capital to potentially "reinvent its business model." However, he expresses doubt about the total addressable market for plant-based alternatives.

Broader Market Implications

Ali Canal offers a perspective on whether these meme stock movements signal a broader market top.

• Speculative Edge: Canal suggests that while these manias are often ascribed larger meanings, they are typically confined to a smaller group of investors and specific speculative areas.
• Diversified Speculation: Beyond meme stocks, similar speculative activity is observed in "drone stocks," "nuclear stocks," "lithium mining stocks," and "independent energy stocks."
• No Indication of S&P 500 Topping: Canal does not believe these movements necessarily indicate that the S&P 500 has "run out of steam" or that investors are broadly searching for alternatives.

Robin Hood: A Contrasting Case Study

The discussion highlights Robin Hood as a company that has transitioned from a meme stock to a "high-flyer" due to fundamental transformation.

• Transformation Over Five Years: Robin Hood, which was instrumental in driving past meme movements, is now described as a "completely transformed" company over the past five years.
• Growth Drivers: Its success is attributed to the tools it provides to retail investors, including "prediction markets" that have "soared," and advancements in "tokenization."
• Investor Tools: The availability of these tools for retail investors is seen as a key reason for Robin Hood's current status as a "total high-flyier."

Conclusion and Takeaways

The primary takeaway is that Beyond Meat is currently experiencing a speculative surge driven by a short squeeze, detached from its weak financial performance and uncertain market prospects. While such meme stock events can be lucrative for short-term traders, they are considered dangerous and unsustainable by market professionals. The discussion also contrasts this with Robin Hood, which has successfully leveraged technological advancements and investor tools to achieve genuine business growth and a strong stock performance. The broader market implications of these meme stock movements are deemed limited, with speculation being concentrated in specific, speculative sectors.