Owning growth stocks is fine and dandy when there is momentum behind the issue and its earnings continue to grow to support its valuation. When the momentum begins to wane and earning growth slows down, however, there can be a major decline in the issue.
The above scenario applies to Beyond Meat Inc. BYND, which is the PreMarket Prep Stock Of The Day.
Huge Winner Off IPO: Beyond Meat made its Wall Street debut on May 2, 2019, at $46. It ended its inaugural session at $65.75. That was just the beginning of a spectacular rally.
At the height of the fake meat mania, the issue finally peaked in July 2019 at $239.71.
Pandemic Low And Rebound: The issue became under extreme selling and ended 2019 at $75.60. It caught a bid with the broad market early in 2020 and peaked in January at $135.25. The issue crumbled along with the broad market in March and bottomed just above its IPO low at $48.18.
The rally off that low didn't end until this past January at $221, quite the round trip for investors. When the Street began to move out of growth stocks, the issue suffered. It battled back from major declines on a few occasions but is in the midst of a four-month losing streak.
Until Friday’s price action, the issue had declined from its month ending June close ($157.49) to end Thursday’s session at $108.62.
The News: Before today’s open, the company lowered its quarterly revenue guidance from a range of $120 million to $140 million, to $106 million, versus the estimate of $133.11 million.
Although a decline in net revenues was already expected, the pace of the decline was larger than the company forecasted. The company cited several factors that had such a devastating impact on its revenue, with one of them being the effects of the COVID-19 Delta Variant.
PreMarket Prep Take: The news broke while the show was live. As expected sellers engulfed the issue and it only took four minutes for sellers to take the issue from the $108 area to $91.99.
Both hosts of the show were hands-off on trying to pick a bottom in the issue. Co-host Dennis Dick wasn't interested in shorting the issue “in the hole” but was hoping for a bounce.
“With all of the prior lows at the $100 area, it may set up for a lower risk short if it can rebound back into the upper $90 handle," he said.
Price Action: After a much lower open ($93 vs. $108.62), it continued lower but found support just under the premarket low at $91.55 and reversed course. As of 12:30 p.m., the rebound off that low has peaked at $97.50 and the issue is trading actively in the mid $93 handle.
Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.
On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.
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