Beyond Meat (BYND) shares soared in early Wednesday trading after the plant-based food group shocked investors with better-than-expected fourth quarter sales and a robust outlook heading into the the start of the year.
Beyond Meat shares had lost nearly a third of their market value last year, slumping to an all-time low of $5.58 in November, as the group struggled to maintain sales growth while input costs surged and concerns about the health of its faux meat products were raised.
Analysts at TD Cowen, in fact, warned investors late last year that the company faced "going concern" risks tied to its deteriorating finances and described the company as being in "survival mode."
Short-sellers, meanwhile, lined up to place bets against the group, with data from LSEG suggesting that as much as 40% of the group's shares outstanding were being used to wager that it would decline.
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Short-sellers bet against a company by borrowing shares and selling them. If the price of the stock declines, the short-sellers buy back the shares at a lower price, return the borrowed stock (while paying a fee), and pocket the difference.
Short-squeeze to send shares soaring
That level of short-selling activity is largely the reason the stock is soaring in early Thursday trading, as investors scramble to repurchase their stock in the wake of last night's better-than-expected earnings and a host of upgrades from Wall Street analysts this morning.
Beyond Meat fourth quarter sales fell 7.8% from the year-earlier period to around $73.7 million, but that result was well ahead of Wall Street forecasts and included a surprise gain from international markets.
Volumes were up 8% over the three months ended in December, more than reversing the 3.5% decline of the third quarter, but aggressive price cutting kept the overall sales levels in negative territory.
However, Beyond Meat said 2024 sales would likely rise to between $315 million and $345 million, with price increases and a renewed focus on cutting costs boosting profit margins into the mid- to high-teens percent.
"Over the last 12 to 18 months we spent considerable time, energy and resources reorienting Beyond Meat's trajectory amid changing and challenging conditions with an eye toward sustainable operations and return to growth," CEO Ethan Brown told investors on a conference call late Tuesday.
"As we look forward, we expect the early results from this extensive spade work, together with specific actions we plan to pursue to bolster our balance sheet, to make 2024 an important, promising year for the Beyond Meat story," he added.
John Oh, analyst with global research firm Third Bridge, said the group's cost cuts, as well as the "rightsizing" of its overall business, were critical steps for the group's "survival mode."
Beyond survival mode for Beyond Meat
“As well, Beyond Meat’s recently launched Beyond IV platform bodes well to regain the subset of consumers who previously left the category due to negative perceptions about the health benefits of plant-based meats and concerns around the ingredients list of Beyond Meat’s products,” he added.
Other analysts were quick to adjust their Beyond Meat price targets in the wake of last night's earnings and the likely short squeeze on the stock in early Wednesday trading.
BMO Capital Markets analyst Andrew Strelzik added $3 to his price target, taking it to $10 a share, while Jefferies analyst Kaumil Gajrawala raised his to $8 from $7.
"We're cautious in our optimism," Brown said. "We've, obviously, had some tough years, but by making these changes and creating the sustainable baseline for which we can grow, we're going to create some room for ourselves to execute and get back on track for growth."
Beyond Meat shares were marked 44% higher in early Wednesday trading to change hands at $10.78 each, the highest since early September.
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