In early afternoon trading Thursday, circa 12:10 p.m. EDT, shares of Beyond Meat (NASDAQ:BYND), Enphase Energy (NASDAQ:ENPH), and Pacific Ethanol (NASDAQ:ALTO) stocks are all down steeply -- and, apparently, all down on no particular news of note.
Shares of plant-based protein producer Beyond Meat have lost 3.8% of their value since last night's closing price. Solar microinverter maker Enphase shares shed 5.2%. Pacific Ethanol stock is down an astounding 12.5%. And about the only thing these three companies seem to have in common is that there's no good reason for them to be going down.
So far as I can tell at least, analysts haven't downgraded any of the three stocks today, nor have they so much as tweaked their price targets lower. None of the companies have announced poor earnings or warned of upcoming disappointments. Granted, we are in the middle of earnings season, and two of these stocks are due to report earnings shortly (Beyond Meat on Oct. 26, followed by Enphase on Oct. 27). With Beyond Meat shares up 75% over the past year, and Enphase up 337%, today's selling could be evidence of nervous investors not wanting to put their profits at risk and selling out ahead of the news "just in case" it's bad.
That still leaves Pacific Ethanol's stunning 12.5% decline to explain, however.
On the one hand, yes, Pacific Ethanol stock has racked up some astounding gains, with its stock price up 18 times in 52 weeks. Those gains could be at risk if Pacific Ethanol's own earnings, due out Nov. 5, don't measure up. On the other hand, though, Pacific Ethanol arguably deserves the gains it's enjoyed.
Historically an unprofitable, low-margin producer of gasoline additives, Pacific Ethanol has pivoted beautifully in the face of the coronavirus, shifting its alcohol production to serve markets hungry for disinfectant and hand sanitizer. Last quarter, this shift gifted Pacific Ethanol shareholders with their first reported generally accepted accounting principles (GAAP) profit in four years, according to data from S&P Global Market Intelligence. It's also showered Pacific Ethanol with free cash flow -- now nearly $44 million generated over the past 12 months.
With the second wave of COVID-19 already washing over Europe and the U.S., I see demand for Pacific Ethanol's signature product only increasing, and given its prospects for growth, a current valuation of 15 times free cash flow really doesn't look excessive to me at all. In fact ... today's sell-off might even be presenting investors with a buying opportunity.