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Beyond Meat bulls are undaunted as bears pile on after surge
[NEW YORK] It's becoming difficult to tell who's more enthusiastic about faux meat on Wall Street: bulls or bears.
Beyond Meat, the veggie burger maker that has more than tripled since its May 1 debut, rose for a second day on Tuesday, putting it on track for a record-high close.
The shares have surged as investors bet that the meat-substitute business is poised for breakout growth, setting suppliers apart from traditional food companies.
At the same time, bearish bets have been piling up fast. About 44 per cent of Beyond Meat shares available for trading are sold short. That puts it among the top 20 most-shorted US companies, according to financial analytics firm S3 Partners.
From the bulls' point of view, the excitement around the company is about the perennial hunt for growth, said Thomas George, a former portfolio manager at TD Asset Management who's now president of Grizzle, a Toronto-based research firm that covers cannabis, cryptocurrencies among others.
"Buy-side managers need to augment their portfolio to introduce significant portions of growth," he said in a phone interview.
With Beyond Meat, "we're talking about something that is just truly in its infancy. This is a 16 to 18 bagger plus opportunity," he said.
The alternative meat industry could be worth in excess of US$34 billion by 2030, and a 40 per cent annual growth rate over the next decade in America is more than achievable, Mr George wrote in a note last week.
"You've got Snoop Dogg, you've got Kyrie Irving, you've got some of the largest, most millennial facing superstars behind this," Mr George said. "Who's going to care" about Tyson Foods?
Mr George's estimates are similar to those from Bernstein's Alexia Howard, one of the two analysts covering the stock, who projects a US$40.5 billion addressable market over the next decade. She holds a US$81 price target on shares.
Fund managers are among those sounding the alarm on the stock's soaring valuation.
Harrington Alpha Fund founder Bruce Cox is on the bears' side. He disclosed a short position in Beyond Meat last week. Smead Capital Management warned about its lofty price tag in a letter to investors on Tuesday.
While it "may be interesting", Beyond Meat's market value was 9.3 times bigger than Amazon's on its first day of trading, Tony Scherrer wrote in a note. He underscored the fact that the company is losing money, faces a lot of well-heeled competitors and relies on a single supplier for 79% of the input to its products with no fixed contracts for any co-manufacturers.
"As investors, it's enough to want a little animal fat in your common stock portfolio," Mr Scherrer wrote.