What happened
Shares of Beyond Meat (BYND 13.63%) fell as much as 18.6% this week, according to data from S&P Global Market Intelligence. After a rough inflation report and a partnership renewal announcement last week, shares of the fake meat company took a tumble. As of 12:37 p.m. ET on Friday, shares of Beyond Meat were down 16.8% this week.
So what
There were no press releases from Beyond Meat this week, but it is pretty clear why the stock fell so much: inflation. Food inflation, to be exact. In the government's latest inflation report for August, food prices were estimated to have risen 0.8% in the month and 11.4% over the last year. That last number is the largest 12-month increase since 1979. While the higher-than-expected broad inflation number brought down the whole stock market, these extremely high food inflation numbers likely put an even bigger dent in Beyond Meat's share price.
Second, Beyond Meat stock likely was affected by an announcement it made last week. On Sept. 7, management announced it was renewing its partnership with Panda Express to bring back its fake-meat orange chicken product. In the days after the announcement, shares of Beyond Meat soared higher. Now, a week later, the company might be seeing the hangover from this press release.
Lastly, Beyond Meat's stock sees wild swings because of its high short interest. Currently, it is estimated that 30% of its shares are sold short, which can lead to wild volatility both up and down. This is especially true in the meme stock era.
NASDAQ: BYND
Key Data Points
Now what
Don't let this price drop fool you. Beyond Meat is a bad business that should be avoided by all investors. Last quarter, revenue was down 1.6% year over year and the company had negative gross profits, meaning it is losing money before paying its corporate, marketing, and overhead expenses. The company has burned over $250 million in free cash flow just this year, and with less than $500 million in cash on its balance sheet, it looks like management is going to have to raise more funds soon.
Revenue declines, negative gross profit, and a huge cash burn is a recipe for disaster. Avoid buying Beyond Meat stock at all costs.
