We're in the middle of a Beyond Meat (BYND +6.63%) rally. The latest meme stock has surged more than 550% over the last week, and at $3.53 a share, the stock price still gives the illusion of affordability, which may entice more meme stock investors to pile on.
That said, Beyond Meat's price is already down more than 55% from its pre-market peak on Oct. 22. Doesn't that mean the meme rally has already fizzled? Not necessarily: This could still very well be the next GameStop.
But here's why that may not be a good thing.
Image source: Getty Images.
Ups and downs
Wednesday's big drop doesn't necessarily mean the rally is over for Beyond Meat. Meme stock rallies often have multiple peaks and valleys in short succession, as traders jump in and out of the stock trying to time their exits to maximize their profits.
A good example of this is the ultimate meme stock, GameStop. On Jan. 1, 2021, before its meme rally began, GameStop's stock closed at $4.71 a share. On Jan. 14, it closed at just under $10 a share. But over the next week, the stock barely budged, before jumping to $16.25 a share on Friday, Jan. 22. But over the next three trading days, shares skyrocketed to close at a jaw-dropping $86.88 a share on Jan. 27 (a return of 1,745% in less than a month)!
The next day, Jan. 28, shares tumbled to $48.40 a share, a 44% one-day loss. On Jan. 29, they were back up at $81.25 a share, a 68% one-day gain, before collapsing 72% over the next two trading days to $22.50 a share on Feb. 2. Those kinds of ups and downs could give an investor whiplash, but the aftershocks continued for a year.
A long and bumpy road
After slowly sinking to $11.50 a share on Feb. 22, GameStop stock was back up to $66.13 a share on March 12, down to $30.09 a share on March 24, up to $75 a share on June 8, down to $41.22 a share on Aug. 23, up to $61.89 a share on Nov. 22, and down to $24.48 on Jan. 28 2022, more than a year after its meme stock rally began. And those are just the major swings! There were plenty of minor ups and downs along the way.
Seemingly dead meme stocks can even lie dormant for multiple years before popping again. After years of slowly sliding lower, GameStop had a mini-meme rally in 2024 as it popped from $10.01 a share on April 22 to $48.75 a share on May 14, before settling around its current price of $23 a share:
NYSE: GME
Key Data Points
GameStop's current $23-per-share price tag is a 388% gain from its pre-meme-rally low. Meme stock enthusiasts will point to that figure as evidence that meme stocks can make shareholders a fortune overnight. But savvy investors should remember: That's only for the people who were lucky (or crafty) enough to invest in the stocks right before they popped. And that ship has already sailed for Beyond Meat.
It may already be too late
If you go back and look at the GameStop stock prices in this article, you'll notice the flip side of the meme stock allure: GameStop's stock never returned to the level of that first peak on January 27, 2021. In fact, most of the subsequent peaks were lower than the ones before them. So, yes, if you were lucky enough to buy during one of the early troughs (like between Feb. 2 and 23, 2021), you'd have made some money at the stock's current price. But if you'd invested at any other time between Jan. 26, 2021 and Jan. 28, 2022, you'd have lost money. Guess when most investors bought in?
So, yes: Beyond Meat could easily be the next GameStop. Its shares have already risen to a level that isn't supported by its fundamentals, and it could surge further, to levels that are completely divorced from reality. However, those shares are likely to come crashing back down (possibly over and over again) with no warning, and investors don't want to be left holding the bag when they do.
Investing in "the next GameStop" is not a good thing for investors unless they're incredibly lucky. And it's unwise to rely on luck when your life savings are at stake. Smart investors should steer clear.
