A lot of stocks have fallen a long way since peaking last year. Momentum is not on their side, but this doesn't mean that you want to bet against them now either.
AMC Entertainment Holdings (AMC 8.23%), Beyond Meat (BYND -3.90%), and Peloton Interactive (PTON 0.66%) have fallen sharply in recent months, down 71% to 81% from last year's all-time highs. All three businesses are going through some challenging times, but they aren't going away anytime soon. Let's see why these are three stocks you probably shouldn't sell short right now.
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AMC Entertainment
AMC has become the ultimate battleground stock, and for the last seven months the bulls have been losing. The country's leading multiplex operator has seen its stock plunge 75% since peaking in early June.
Outside of two weekends over the past year and a half box office receipts are falling well short of where they were two years ago. Studios are no longer at the mercy of cinema operators. They are shortening release windows if not eliminating them entirely to keep their high-profile streaming services relevant.
The valuation argument for AMC at current levels is iffy. The fundamentals don't point to a company worth an enterprise value of $18.7 billion. AMC just kicked off what should be its fourth year in a row of losses, and analysts don't see a return to profitability until 2024 at the earliest.
AMC is still a dangerous stock to short at this point. There were several spikes higher through the first half of last year, and despite increasing its share count nearly fivefold over the past year short interest is still high at 18% of the outstanding share count. With a galvanized community of bulls and a CEO who knows how to pull their strings we haven't seen the last of the rallies.
Beyond Meat
If AMC bulls are complaining about naysayers circling the wagon, the Beyond Meat camp can rightfully say, "Hold my plant-based burger." Short interest for the food company is clocking it at a whopping 32% of the outstanding share count.
Beyond Meat has had its challenges. It may seem to be cornering the market for meatless proxies of beef products along with rival Impossible Foods, but growth has slowed. Beyond Meat was posting triple-digit percentage gains before the COVID-19 crisis, but its business has decelerated to the point where the top line posted a mere 8% year-over-year advance in its latest quarterly report.
More people are embracing plant-based diets, but competition is heating up. However, we already saw Beyond Meat rally earlier this month when KFC launched a poultry-free menu item featuring Beyond Fried Chicken. Reviews have been mixed, but this should result in more brand awareness and perhaps other major chains playing nice with Beyond Meat. With more than a third of its public float being shorted it won't take much to trigger a short squeeze.
Peloton
It's easy to hate on Peloton these days. It was a market darling in 2020 when the pandemic forced us to not just work, but also work out from home. Peloton's high-end treadmills and stationary bikes helped replicate the gym and spinning class experience, complete with live instructors offering call outs and leaderboards. Things got rough when COVID-19-tackling vaccinations become widespread, and folks felt comfortable returning to sweaty fitness centers.
Peloton shed more than three-quarters of its value last year. It had a pride-swallowing treadmill recall, and its bike even played a scripted part in killing off a character from a popular TV show. It's taking its toll. Peloton is now working on back-to-back quarters of sequential dips in workout sessions completed and revenue.
The reason why this is still too dangerous to short is that Peloton still had a record 2.5 million connected fitness subscribers by the end of its latest quarter. Folks who make a four-figure investment on in-home fitness equipment aren't going to churn out of premium subscriptions a few months later. The record surge in cases spurred by the omicron variant also suggest that it's not going to be safe to go back to your favorite spinning class or boutique workout center anytime soon.
