Why Beyond Meat Stock Skyrocketed 40.3% Last Month but Is Plummeting in May
Key Points
Beyond Meat stock soared last month thanks to broader-market trends and meme-stock momentum.
The company's share price also got a boost from new product and partnership announcements.
The stock has seen a big pullback following the company's first-quarter report in May.
Beyond Meat (NASDAQ: BYND) stock enjoyed a month of roaring gains in April's trading, with the company's share price gaining 40.3% across the period. The stock's incredible rally was at least partially facilitated by strong bullish momentum for the broader market, with the S&P 500 rising 10.4% in the month and the Nasdaq Composite rising 15.3%.
The broader market saw an exceptionally strong run last month, with investors buying back into stocks after sell-offs in February and March in response to some better-than-expected macroeconomic data and de-escalation in the U.S. and Israel's war with Iran. In addition to the positive market backdrop, Beyond Meat saw big valuation gains in response to new product announcements, a distribution partnership, and meme-stock momentum.
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Beyond Meat stock posted a big rally in April
Down roughly 99% over the last five years, Beyond Meat stock is in meme stock territory. It's also a penny stock that has frequently traded below $1 per share in recent months. On the other hand, these qualities can sometimes pave the way for the company's share price to see outsized gains on relatively little news -- especially when the broader market is roaring higher like we saw last month.
Meme stocks will tend to fare much better when the market is in a bullish mode, but the company also made some announcements last month. For example, the food-and-beverage specialist announced on April 13 that it was launching its new lineup of plant-based breakfast sausages. The company followed that news up with a press release on April 16 announcing that it had signed a distribution agreement with beverage distributor Big Geyser to distribute its new Beyond Immerse protein drinks in the New York region. The company also announced on April 23 that it had launched its new plant-based Beyond Chicken Pieces nationwide at over 2,000 Kroger stores.
Beyond Meat stock has seen a big pullback in May
Bullish momentum for the broader market has continued in May, with the S&P rising roughly 2.6% in the month's trading so far as of this writing and the Nasdaq Composite up roughly 5.3%. Despite the favorable backdrop, Beyond stock has seen a big valuation pullback.
Beyond published its first-quarter results on May 6, and performance for the period and forward guidance were disappointing. Sales for the period came in at $58.2 million, and the business recorded an operating loss of $41.1 million. Beyond's gross margin improved to 3.4% in the quarter, up from -10.1% in the prior-year quarter, but it still came in at a concerningly low level.
Looking ahead, Beyond Meat guided for Q2 sales to be between $60 million and $65 million. While that suggests a meaningful improvement on a sequential quarterly basis, the company also cautioned that it was facing a high level of uncertainty and operational volatility. Beyond may still have some avenues to energize its performance, but the outlook appears very challenging right now.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Beyond Meat. The Motley Fool recommends Kroger. The Motley Fool has a disclosure policy.