Beyond Meat's meme stock rally might be back on again
A meme stock rally is known for its rapid surge that can make investors a lot of money, followed by an equally fast plunge that can then cause investors to lose a lot of money.
But while these rallies tend to leave as quickly as they arrived, Beyond Meat's (BYND) stock could be adding a new twist to the meme stock story. That's because while its initial rally did in fact start and stop in rapid succession, the company appears to be the meme stock that keeps coming back to life.
The initial rally happened back in October, when the company's stock rose from a closing low of $0.52 on October 16 to a peak close of $3.62 on October 21. That was a nearly 600% rally in the span of just three trading sessions.
The stock then surged another 112% on October 22 before plunging the next day. Investor interest eventually waned on the stock, which tends to happen when a meme rally reaches its natural conclusion.
However, after a quiet November for the struggling plant-based company, the company's stock took off again on the first day of trading for December with no news propelling the rally.
Shares of BYND soared 36.5% on Monday, sending its stock up 55.5% over the past five days. This follows a mini-rally that the stock experienced last week.
After the company's stock fell below the minimum $1 bid price required to be listed on Nasdaq, shares rallied 19% to lift it back over threshold. The stock was priced at $1.34 at the close of trading on Monday.
And when one considers the fact that a meme stock rally tends to happen when retail investors decide to prop up the shares of a struggling company, this latest surge starts to make more sense.
Legal and financial setbacks add more headwinds
Last week, a jury in Massachusetts ruled that Beyond Meat owes its rival Vegadelphia $39 million for infringing on the latter's trademarked slogan.
Vegadelphia's slogan is "Where Great Taste is Plant-Based," while Beyond Meat uses the slogans "Great Taste, Plant-Based" and "Plant-based, Great Taste."
"Beyond Meat’s flooding of the market with a virtually identical slogan, well after becoming aware of Vegadelphia’s registered trademark rights, cost its competitor Vegadelphia the perfect expansion opportunity at the height of the plant-based meat boom," Vegadelphia attorney Ben Wagner of Troutman Pepper Locke said in a statement.
In a court document, Beyond Meat said it disagreed with the ruling and will “seek further judicial review of the decision and appeal the verdict."
In addition to this legal setback, the company also recently reported widening losses in the third quarter due to a $77.4 million impairment charge. It reported a $110.7 million net loss, compared to a $26.6 million net loss the prior year.
The company also pointed to a further decline in sales through the end of the year.
Despite the latest rally, its stock is down 64.4% for the year.
Mizuho analyst John Baumgartner recently cut his price target for BYND to $1 from $1.50, while maintaining an Underperform rating.
"As U.S. demand for animal meat is at multi-decade highs, and pricing from plant-based meat peers becomes more competitive, we believe risks to growth remain skewed to the downside," Baumgartner wrote in a client note.