Short selling data can be a very powerful risk management tool. Short sellers tend to do their research. If they’re targeting a stock, there’s usually a good reason they are doing so.
In this report, we are going to look at the short selling data on Beyond Meat Inc (BYND:US). Beyond Meat is a 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 is listed on the NASDAQ Global Select Market and currently has a market capitalization of $3.6 billion.
Beyond Meat: Short Selling Data
When we last looked at the short selling data on Beyond Meat, on November 17, we noted that there were a few red flags. One was the fact that short interest was extremely elevated at 37%. Another was the fact that utilization – a measure of demand from short sellers – had spiked up to 94%. We saw these red flags as a bearish indicator and said that, in our view, caution was warranted towards the stock. That was the right call, in hindsight, as since that article, the stock has fallen approximately 30%.
So, what is the data saying today then? Are the short sellers still targeting BYND stock or have they backed off after the recent 30% decline in the share price?
Well, the latest data shows that short interest here is still very high. At present, approximately 20.7 million BYND shares are on loan. This represents 34.36% of the free float.
Meanwhile, utilization currently stands at 93.6%. That’s higher than it was in mid-November. This indicates that demand for the stock from the short sellers is still very high.
Additionally, the cost to borrow stock is now 4.19%. That’s almost 30% higher than it was in mid-November. Again, this indicates high demand on the short side right now.
Why Are Short Sellers Targeting Beyond Meat?
As for why the short sellers are still targeting Beyond Meat, it could be down to the fact that the company’s valuation remains quite high. BYND doesn’t have a price-to-earnings ratio as the group is not yet profitable. However, the price-to-sales ratio is around eight. That’s about 30% higher than that of oat milk company Oatly, which operates in the same industry.
It could also be related to the fact that the company is not expected to be profitable any time soon. With bond yields rising, unprofitable companies are very much out of favor.
Finally, it could be related to industry challenges. Back in November, Beyond Meat published very disappointing guidance for Q4 due to Covid-19 uncertainty, labor availability, and supply chain disruptions.
Whatever it is the short sellers are focusing on here, we think caution is warranted towards the stock. That’s because heavily-shorted stocks often go on to underperform.