If a stock has a high level of short interest, it can pay to approach it with caution. Short sellers tend to do their research and if they’re shorting a stock there’s usually a good reason why.
In this report, we are going to examine the short interest data on Beyond Meat Inc (BYND:US). Beyond Meat is an American food company that specializes in plant-based meats. The company, which was founded in 2009, currently has partnerships with a number of fast-food chains including McDonald’s, TGI Fridays, and Pizza Hut and also sells its products through retail channels. It’s listed on the Nasdaq and has a market cap of $2.36 billion at present.
Beyond Meat: Short Interest Data
The last time we covered Beyond Meat was in early February. At the time, we were concerned about the high level of short interest as 20.7 million BYND shares were on loan, representing about 34.4% of the free float. This indicated that there was a high level of bearish sentiment towards the stock. Since that article, Beyond Meat’s share price has fallen from around $64 to $37. So, the short sellers will have made some massive gains here. What’s interesting, however, is that they haven’t backed off after generating big gains. Instead, they have actually increased their short bets on the stock.
Indeed, our data shows that at present, 29.52 million BYND shares are on loan, representing an increase of 42% since our last coverage of the stock. That equates to 48.9% of the free float. Utilization – a measure of demand from short sellers – is at 100% versus 93.6% in November. These figures send a clear message and that is that the short sellers expect Beyond Meat stock to keep falling, despite the fact it’s lost more than 70% of its value over the last year.
Why the Short Sellers Expect BYND to Fall
It’s not hard to see why short sellers are targeting Beyond Meat right now.
For starters, the company is not profitable. This year, Wall Street expects the group to generate a net loss of $286 million. Yet the valuation remains quite high at over $2 billion.
Secondly, the market for plant-based foods is becoming more challenging. According to data from NielsenIQ, total US sales of meat alternatives have plateaued in 2022, with sales rising just 0.3% year on year for the 52 weeks ended May 28. Meanwhile, competition in the plant-based meat space is rising, meaning Beyond Meat cannot raise its prices to offset inflation.
It’s worth noting that back in January, McDonald's said it would expand the US test of its "McPlant" burger – made with Beyond patties – to 600 locations. Yet sales have not met projections and McDonald's will not launch the sandwich nationally this year, according to BTIG analysts.
Third, broker sentiment towards the stock is deteriorating. Recently, analysts at Credit Suisse halved their price target to $20 to reflect a weaker growth outlook. That implies downside of around 40% from current levels.
Given the high level of short interest, we think caution is warranted towards Beyond Meat stock right now.