Quiver Quantitative - Beyond Meat stock (NASDAQ:BYND) experienced a dramatic surge, jumping as much as 61% in intraday trading, marking its best one-day move since 2019. This leap has placed significant pressure on short sellers, who are now grappling with nearly $74 million in paper losses. The rally in Beyond Meat's shares is not just a reflection of its quarterly earnings report but also sets the stage for a potential short squeeze. Such a scenario occurs when short sellers, those betting against the stock, are compelled to buy back shares to cover their losing positions, further driving up the stock price.
The plant-based protein company's stock is now heavily shorted, with about 38% of its shares outstanding being used in short positions. The scarcity of shares available to short, coupled with a high borrow fee of 310%, is exacerbating the situation for those betting against the stock. According to Ihor Dusaniwsky, managing director of predictive analytics at S3, this could lead to short sellers being squeezed out due to high stock borrow costs and significant recent losses.
Market Overview: -Beyond Meat surges, squeezing short sellers: Shares jump over 60% after earnings report, inflicting losses and potential squeeze on bearish bets. -High borrow fees and crowded short position: Short sellers face additional pressure due to limited borrowing availability and high costs. -Analyst sentiment remains bearish: Despite the rally, analysts maintain negative outlooks, citing concerns about the company's future.
Key Points: -Earnings surprise triggers significant price rise: Beyond Meat share price spikes on positive outlook and guidance towards profitability. -Short sellers face mounting losses: Significant intraday gains translate to substantial paper losses for contrarian traders. -Market dynamics suggest potential squeeze: High borrow fees and limited availability increase the risk of short sellers being forced out.
Looking Ahead: -Sustainability of the rally: Whether the price increase can be sustained amidst prevailing analyst pessimism. -Impact on short sellers: Potential for further short covering and additional price pressure on the stock. -Beyond Meat's long-term prospects: Whether the company can achieve profitability and address bearish concerns.
Beyond Meat's shares are now on a trajectory to reach their highest level since December, turning positive for the year after three consecutive years of losses. This upturn follows a better-than-expected sales report and the company's announcement of a path to profitability in 2024. However, skepticism remains among bears like Howard Penney of Hedgeye Risk Management, who sees little future for the company despite recent gains.
While Beyond Meat has no buy ratings and a generally bearish outlook from Wall Street analysts, its recent performance and the crowded nature of its short position highlight the complexities and risks inherent in short selling. This situation underscores the volatile nature of the stock market and the unpredictability of investor sentiment, particularly in sectors like alternative proteins.
This article was originally published on Quiver Quantitative