Options Bears Pounce as Beyond Meat Gets Bruised

Several analysts, including Jefferies, came in with post-earnings price-target cuts

by Lillian Currens

Published on Oct 29, 2019 at 10:19 AM

It was Beyond Meat Inc's (NASDAQ:BYND) third time stepping into the earnings confessional as a public company, and the stock is experiencing a steep sell-off in the wake of the results. While the plant-based burger name posted a third-quarter profit of 6 cents per share on $91.96 million in revenue -- both of which exceeded analysts' estimates -- and lifted its full-year forecast, the security is down 19.6% at $84.61.

Part of the downside could be a result of Beyond Meat CEO Ethan Brown's comments on rising competition in a post-earnings conference call. However, another likely reason is because the firm's lock-up period for its early backers has ended, suggesting that early supporters of BYND may be cashing out. 

A round of bear notes could also be creating headwinds. So far, four members of the brokerage bunch have slashed their price targets, which includes a whopping $75 cut to $115 at Jefferies. The consensus 12-month target price of $122.50 still stands at a 44.7% premium to current levels, though. On the other hand, most analysts in coverage already had a cautious rating on BYND, with six saying it's a "hold" or worse, and only two saying it's a "strong buy."

Today, the Wall Street newcomer is slicing through recent support at the round $100 level, trading at new five-month lows. Since its all-time peak at $239.71 on July 26, BYND has been on the decline, pushed lower by its 40-day moving average, and more recently, its 10-day trendline, which contained yesterday's pre-earnings pop. 

There's plenty of skepticism priced into the sliding shares, too. While short interest fell 7.8% in the last reporting period, these bears still control over a quarter of the stock's available float. Plus, in the last 10 days on the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) 1.36 puts have been bought to open for every call.

This bearish bias is continuing today, with more than 50,000 BYND puts traded so far -- five times what's typically seen at this point, and volume pacing in the 100th annual percentile. The weekly 11/1 80-strike put is most active, and it looks like new positions are being purchased here. By doing so, traders expect Beyond Meat stock to sink below $80 by expiration at the close this Friday, Nov. 1.

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