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Beyond Meat stock may be a gigantic bubble

Brian Sozzi

The air is quickly filling into the balloon that has become Beyond Meat’s stock price. If investors aren’t careful with the stock right now, it could prove as unsettling as scoffing down a raw Beyond Meat plant-based burger.

What goes up must come down, cautioned TD Ameritrade Chief Markets Strategist JJ Kinahan on Yahoo Finance’s The First Trade. Kinahan said he gets worried anytime a stock goes up so fast in a straight line as Beyond Meat (BYND) has done since its May initial public offering.

Kinahan noted that Beyond Meat was one of the most popular stocks bought by TD Ameritrade’s retail clients in May. Indeed, investors continue to show little hesitation to eat up Beyond Meat’s stock this month. The faux meat maker’s stock exploded 28% on Monday on news a new “ground beef” product would be available for the first time at a Boulder, Colorado, location of Amazon-owned Whole Foods.

Ethan Brown, center, CEO of Beyond Meat, attends the Opening Bell ceremony to celebrate the company's IPO at Nasdaq, Thursday, May 2, 2019 in New York. California-based Beyond Meat makes burgers and sausages out of pea protein and other ingredients. (AP Photo/Mark Lennihan).

That insane reaction (it’s faux ground beef, people) by investors follows aggressive buying last week post better-than-expected first quarter earnings. Mr. Market came away impressed with Beyond Meat CEO Ethan Brown on his first earnings conference call with the Street. Moreover, Brown flat-out denied it would have trouble meeting consumer demand due to production bottlenecks.

Beyond Meat’s market cap now stands at an eye-popping $10.3 billion despite the company never turning a profit. The stock is up a dizzying 175% since its May IPO as investors wager Beyond Meat turns a profit amid a barrage of new products in 2020. Optimism the company will ink a deal with McDonald’s soon has also spurred the buying activity.

“While Beyond’s 1Q was relatively in line (update provided in April), the company's upwardly revised FY20 sales outlook (+140% YoY vs. +120% prior), broad-based momentum, and bullish commentary on ability to handle a potential McDonald’s win should continue to drive the stock higher,” wrote Jefferies analyst Kevin Grundy after the earnings release.

Brian Sozzi is an editor-at-large and co-host of ‘The First Trade’ at Yahoo Finance. Follow Brian Sozzi him on Twitter @BrianSozzi.

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