It's still only January, and shares of Beyond Meat (NASDAQ:BYND) have already rocketed 60% higher this year. 

The stock has bounced back from a lull last year on renewed optimism that the plant-based meat producer can expand with deals with restaurant giants like McDonald's (NYSE:MCD) and Starbucks (NASDAQ:SBUX), and on a new sandwich tie-up with Dunkin' (NASDAQ:DNKN).

Those gains have come during a month of exceptionally high trading volume. A short squeeze seems to have helped lift the stock, as 18% of the fake meat specialist's shares are sold short. Since the year began, the stock has made daily jumps by double-digit percentages on four separate occasions. Here are a few of the highlights that have lifted the stock so far this month:

  • On Jan. 7, Beyond Meat shares jumped 12.5% as news broke that rival Impossible Foods would not seek a deal with McDonald's. Investors interpreted this as a bullish sign for Beyond Meat, which is already testing a plant-based burger with the Golden Arches in Canada.
  • The stock climbed further after Impossible Foods wowed the crowd at the Consumer Electronics Show with the unveiling of Impossible Pork, which seemed to lift Beyond Meat as it showed the ability to grow demand for plant-based meat with new products.
  • On Jan. 13, Beyond Meat stock gained 19% as the company announced a new Beyond Sausage that is sponsored by Snoop Dogg, who is also an ambassador and shareholder in Beyond Meat.
  • Finally, the stock gained another 18% on Jan. 21 after Starbucks said it was aiming to add more plant-based options to its menu as part of its mission to become a more sustainable company over the next decade.
A sample of some of Beyond Meat's products.

Image source: Beyond Meat.

The fundamental problem

The events above have driven Beyond Meat stock significantly higher this month, but the news itself hasn't changed any of the fundamentals of Beyond Meat's prospects. Either investors are overreacting to inconsequential news, or the stock's gains are being primarily driven by traders looking to make a quick buck. For instance, the Starbucks announcement on Tuesday was widely reported as if the coffee chain was about to add plant-based meat to its menu and that a partnership with Beyond Meat was likely.

The reality of that news was comparatively minor, as Starbucks CEO Kevin Johnson said the company aimed to "expand plant-based options, migrating toward a more environmentally friendly menu" as part of an initiative to become more environmentally sustainable over the next decade. In the announcement, Starbucks did not say a change in its menu would be imminent, nor did it even say that it would be adding plant-based meat to the menu, as there are plenty of other options in the plant-based world. Investors nonetheless interpreted the news as a big win for Beyond Meat, even though the announcement itself was essentially a non-event.

The other news items above seem to be similar, as Beyond Meat does not appear to be any closer to a broad-based deal with McDonald's, and most analysts believe that Beyond does not have the capacity to supply all of McDonald's 14,000 domestic restaurants. The new Dunkin' sandwich is unlikely to move the needle as well, though it may help Beyond gain publicity.

Beyond Meat shares have traded in unusually high volume over the last two weeks, as on average 19.8 million shares have exchanged hands in the last ten sessions, more than half of the float at 33.6 million. That shows that each share is being sold more than once every two days on average. By comparison, the stock's daily volume did not reach 10 million once on a single day last November or December. That seems to indicate that the recent rally is being driven by momentum traders and a short squeeze, and not by any meaningful change in the stock's fundamentals or its prospects.

Still priced for perfection

As a company, Beyond Meat is an incredible success story, posting rocket-like growth after seeing revenue jump 250% and the bottom line turn profitable in its most recent quarter. Along the way, it's convinced restaurant chains and consumers of the potential of plant-based meat to revolutionize the way we eat.

However, the stock still remains detached from the fundamental realities facing the company, and its best-case scenario already seems mostly priced into the stock. Meanwhile, Beyond Meat faces increasing competition from the likes of Impossible Foods and multinational food producers like Tyson Foods and Nestle, as well as capacity constraints and the reality that its meteoric growth rate will slow down in the coming quarters.

At a price-to-sales ratio of near 30 based on this year's expected revenue of $265 million to $275 million, Beyond Meat remains dearly priced, especially for a packaged food stock. As long as rallies like the recent one are driven by momentum traders instead of the stock's fundamentals, long-term investors would be best off staying on the sidelines for now.