Key Points
An effort to turn Beyond Meat into the next great meme stock was briefly successful, but not durable.
The company recently parted ways with its controller after identifying weakness in its internal reporting.
Despite an expanded partnership with Walmart, plant-based meat sales are stalling in the U.S.
In mid-October, an army of retail investors, many taking their cues from social media, sparked a rally in Beyond Meat (NASDAQ: BYND) that propelled the previously struggling stock from around $0.50 to nearly $8 in just days. Those gains evaporated, and the shares' penny stock status was reborn, as highlighted by a Dec. 19 close of $1.11.
Betting on a sequel is a long-odds wager unlikely to pay off because good news, including the company's debt-reducing efforts, looks priced into the stock. As for the often discussed short interest, 26% of the stock's float is sold short, according to FinViz data, but if traders don't buy the stock to close short position, a potential catalyst is eliminated.
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Likewise, Beyond Meat's expanded partnership with Walmart is now ancient history. If similar headlines don't emerge, near-term upside could be hard to come by.
Beyond Meat has an array of challenges
Beyond Meat's outlook is murky and it's contending with headwinds. Last week, the company announced the termination of Controller Yi Luo. That firing stemmed from "existing material weakness in our internal control over financial reporting" disclosed in a November regulatory filing.
Beyond Meat admitted it doesn't yet have the resources in place to handle some of the complex transactions in which it previously engaged. So it needs to clean up its own backyard before a rally materializes.
Even if cleaning occurs, investors can't ignore waning plant-based meat demand in the U.S. Plant-based burgers, once Beyond Meat's bread and butter, are one of the reasons for that decline. American consumers are souring on meat alternatives because those products are considered processed foods, which are out of fashion.
Some studies confirm that meat alternatives are among the least healthy vegan foods, and those products offer little to no benefit relative to "the real thing." With that, it's hard to bet on a Beyond Meat rebound.
Should you buy stock in Beyond Meat right now?
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Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Beyond Meat. The Motley Fool has a disclosure policy.