In recent days, UK investors have been aggressively buying stock in Beyond Meat (NASDAQ: BYND). Believe it or not, this is the fourth most bought stock on AJ Bell’s platform over the last week.
Should I follow the crowd and buy this growth stock for my portfolio? Let’s discuss.
I was right about this stock in the past
It’s been a long time since I covered this one. Over three years, in fact.
The last time I covered it, in August 2022, it was trading for $33. At the time, I said it was very risky as demand for plant-based meat was dwindling.
Earlier this month, the stock traded as low as $0.50. So, it’s fair to say that it has been a poor long-term investment (and that my view on the stock was right).
The new meme stock
In recent days, however, it has exploded higher. At one stage, it was trading near $7.70.
There are a couple of reasons for the surge in the share price.
First, the company has signed a new distribution deal with US retail powerhouse Walmart. According to Beyond Meat, Walmart will be among the first national retailers to offer the new ‘Beyond Burger 6-Pack’.
Second, it’s been hyped up on Reddit (it’s become a meme stock). It’s also been added to the Roundhill Meme Stock ETF.
It’s worth noting that this stock has been heavily shorted recently (like GameStop a few years ago). In other words, lots of sophisticated investors, such as hedge funds, have been betting against the stock.
When a heavily-shorted stock suddenly sees a high level of investor buying, it can send the share price sharply higher. Because when shorters need to close their positions they have to buy shares to do so — short sellers borrow stock from brokers and then sell them, hoping to buy them back at a lower price.
Should I buy?
Now, I don’t mind the occasional plant-based meat-like burger. I’ve tried Beyond Meat’s products in the past and they’re decent.
But looking at the fundamentals here, they seem very weak, in my view.
For a start, sales are falling. This year, analysts expect revenue of $282m, down from $326m last year.
I think one issue here is that Beyond Meat’s burgers are expensive. During Covid – when plant-based meat products took off – consumers had a lot of disposable income. Today, they don’t. So, I’m not confident about sales growth here.
Additionally, there are no profits. This is a company that just continually loses money.
Last year, its net loss was $160m. This year, it’s expected to be $148m.
On top of all this, the company has a ton of debt on its books. This adds a lot of risk.
Given the weak fundamentals, I won’t be joining other UK investors and buying the stock. I suspect that as soon as speculators lose interest here and move on to the next shiny thing, its share price will fall.
In my view, there are much better growth stocks to buy today.
