Beyond Meat, Inc. (BYND) stock is under pressure following a CBC report that McDonald's Corporation (MCD) has discontinued trials of plant-based burgers in Canada. The bearish development has yet to be confirmed or denied by either company. If confirmed, the fast food giant is less likely to roll out these meatless products for American appetites, especially with the pandemic weighing heavily on quarterly revenues.
McDonald's currently offers meatless burgers in Finland, Sweden, India, South Africa, and Australia. However, a North American rollout would require major outlays and risk, which might not be in the cards right now because many franchisees are struggling to keep the lights on. Worse yet, most operations have been leased to franchisees by the parent in an accounting trick that now represents a major liability for both parties.
Barclay's downgraded Beyond Meat stock to "Underweight" after the Canadian report, adding to a mixed Wall Street consensus. The stock now carries just two "Buy" ratings from a pool of 12 analysts, with five "Hold" and five "Sell" recommendations highlighting major skepticism about profitability in coming quarters. Beyond Meat stock is also fully priced according to analysts' view, trading 35% above the median $98 price target.
Even so, the company has diverse revenue streams that continue to grow at a healthy pace. As an example, Beyond Meat is currently building its first European co-manufacturing facility with partner Zandbergen in the Netherlands, highlighting a commitment to grow business on the other side of the Atlantic. The pandemic has also underpinned sales, with a spike in at-home consumption that may continue well after a return to normalcy.
Beyond Meat Daily Chart (2019 – 2020)
The stock has been highly volatile since coming public at $46 in May 2019, adding excessive risk for the majority of market participants. Momentum players entered right after the first print in that session, lifting price into the mid-$60s by the closing bell. An aggressive buy bid continued into July, peaking at an all-time high near $240. The company then issued a secondary offering, triggering a steep slide that continued through the end of the year.
The decline bottomed out in the low $70s, yielding nearly two months of testing before committed buyers returned in force in January 2020. However, the subsequent uptick was short lived, ending at $135 just one week later. That marked the high, ahead of a small double top pattern that broke to the downside in February when world markets collapsed as a result of the coronavirus pandemic.
The decline reached the December low in March, triggering a breakdown that found support within two points of the IPO opening print on March 19. It remounted broken support in April, continuing to add points at a healthy pace into June, when the bounce stalled at the .618 retracement of the 2019 to 2020 downtrend. The subsequent pullback has now crossed the .50 retracement, which also marks the breakdown from support carved in the third quarter of 2019.
Beyond Meat Short-Term Outlook
The 50- and 200-day exponential moving averages (EMAs) have aligned close to Monday's low at $125, predicting that the stock will soon bounce, perhaps in reaction to clarifying statements about the Canadian trial. However, the on-balance volume (OBV) accumulation-distribution indicator is flashing a minor warning sign after failing a breakout above the May peak. The January high is more critical to price action in the third quarter, with a test likely to unfold at the same time the stock hits 200-day EMA support.
Finally, the short-term decline broke a two-month trendline when it crossed the .50 retracement level, predicting that a bounce will fail between $144 and $150. Aggressive short sellers may wish to reload positions in that price zone because protective stops can be placed relatively close to new exposure. However, there are no guarantees of success because this wickedly volatile stock could still hit new highs, given the right catalysts.
The Bottom Line
Beyond Meat stock is showing signs of technical deterioration after reports that McDonald's may not include plant-based burgers on North American menus.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.