Shares of Beyond Meat (BYND) surged on Friday, closing higher by almost 40% at $138.65 after the plant-based meat maker reported its first earnings as a public company. It joined Zoom Video (ZM) , another recent initial public offering that was ripping higher on the day after earnings as well.
Beyond Meat reported an adjusted loss of 14 cents per share, a penny narrower than expectations, while revenue of $40.2 million surged 215% year over year and topped analysts' estimates of $38.9 million. For the year, management expects revenue of $210 million (up 140% year over year) vs. consensus expectations of roughly $205 million.
Does that really make Beyond Meat stock worth almost $8 billion? Short of some speculative M&A, of course not.
But because of the incredibly low float and the high borrowing costs, short-sellers have been kept at bay. Although a rally like this has many of them salivating for an entry. What do the charts look like now?
Trading Beyond Meat Stock
When it comes to newly public stocks, these squeezes are often an issue with their share price. Remember GoPro (GPRO - Get Report) or Shake Shack (SHAK - Get Report) when they went public? Shares surged to $90 only to be cut down significantly as more shares unlocked and became available for trading.
It's a simple supply/demand principle at play. Low supply (available stock) and high demand equals a higher share price. The more supply that comes into the market, the more demand is needed to keep shares elevated.
For Beyond Meat stock, that means its impending doom is coming, although clearly not on Friday.
Shares are surging on the day, with the stock now up more than five-fold from its $25 IPO price. A channel extension off its May highs comes into play right in this $130 area. More pronounced channel resistance extends up toward this $118 to $120 area, which BYND stock easily hurdled in morning trade.
Look to see if Beyond Meat stock can maintain above prior channel resistance (blue line). If this level turns to support, the rally can keep going. In that case, look to see if shares can push through the channel highs (purple line) and take out Friday's highs.
Should prior channel resistance fail as support, I'm looking for a pullback into the low $100s. There it will find uptrend support, as well as the 10-day moving average. Below that brings up the 38.2% retracement near $94 and the 20-day moving average near $91 and trending higher.
I am not bullish on BYND stock over the intermediate to long term simply because the valuation does not support these lofty prices. The current action is simply a function of supply and demand. That said, we have to respect price until the charts say otherwise. If I bought into the IPO or were long coming into the report, I would most certainly be booking profits.
Behind the Label: A Look at the History of Beyond Meat