Fake Meat Poisons Wall Street
Plant-based protein purveyor Beyond Meat Inc. (NASDAQ:BYND) had a golden opportunity to build on its sizzling IPO last night after beating earnings and raising full-year guidance.
Instead, company insiders opted for a cash grab.
Company insiders are launching a plan to sell more than 3 million shares, Bloomberg reports, “dumping about 5% of the company’s outstanding shares on the market at once.” The stock is set to open lower by more than 13% this morning following the news.
One positive coming out of this debacle is that management is showing its true colors early in the game. Beyond went public less than three months ago and enjoyed a meteoric rise. The company just quadrupled its revenues, yet feels the need to dilute its stock. Even worse, management convinced underwriters to ignore their original lock-up terms (insiders originally weren’t allowed to sell shares until Oct. 28).
So congrats to Beyond Meat on the cash grab — and say a quick prayer for any speculators who grabbed shares ahead of last night’s earnings announcement.
Next up: Some of the market’s hottest momentum names took a huge hit to start the new trading week.
Lost in the crazed Beyond Meat headlines was the fact that red-hot software stocks and other popular momentum names were hit hard yesterday.
Spooked traders took profits at the opening bell, punching a one-way ticket to purgatory for some of the Nasdaq’s stand-out 2019 performers. From our own trading portfolio, Shopify Inc. (NASDAQ:SHOP) and Roku Inc. (NASDAQ:ROKU) dropped 5%, while Splunk Inc. (NADSAQ: SPLK) slipped as much as 3% before recovering some of its losses.
When it comes to momentum trades, shakeouts like the one we experienced yesterday are part of the deal. The stock market’s never going to let you ride off into the sunset with a sack of cash without taking its best shot.
As you’ve probably noticed, I love the momo names just as much as the next trader. But the market’s going to find a way to keep us honest and it happens more often than we like to remember. Sudden drops following moves to new highs are part of the deal.
But yesterday’s selloff doesn’t change the narrative just yet. We’ll need to see follow-through to the downside before we can start talking about the potential for a serious correction in these stocks.
Monday’s market action wasn’t all bad. In fact, a couple of our key holdings staged impressive breakouts as the software carnage unfolded.
As software stocks endured some serious selling pressure yesterday, a few of the plays in our model portfolio made some big moves.
GrubHub Inc’s (NYSE:GRUB) comeback run grabbed another helping of gains Monday. The food delivery pioneer gained almost 7% on the day, jumping above its 200-day moving average for the first time in nine months.
GRUB was once an explosive stock, rising from a post-IPO low of $18 to a high of $145 by August 2018. That’s right where the stock ran into more than its fair share of sellers. A nasty downtrend trapped shares for the better part of the past year.
Thankfully, we spotted the early signs of GRUB’s powerful turnaround. As I noted back in June, a close above its April highs helped spark an extended rally. Our trade is now showing double-digit gains as the stock nears four-month highs.
Meanwhile, Chipotle Mexican Grill’s (NYSE:CMG) is exploding to new highs.
We hopped onboard CMG as it broke out above $725. The rally has now extended the stock above $800 to new all-time highs.
Chipotle shares have enjoyed a nice post-earnings melt up since topping analyst expectations last week. Goldman Sachs is even hopping onboard the burrito bandwagon, slapping a meaty $1,000 price target on the stock. A rally of that magnitude would tack on another 25% to your growing gains on this hot stock.
Finally, your Twitter Inc. (NYSE:TWTR) trade is off to a hot start after a surprise second-quarter earnings beat. Shares jumped almost 10% on Friday after management hinted that its daily active user count was beginning to grow again.
Twitter’s numbers were so convincing, in fact, that investors were more than happy to ignore soft third-quarter revenue guidance. That’s just fine with me. Last week’s quick gains kicked this trade into high gear. We’re approaching double-digit gains after holding the stock for just two weeks — with more on the way!