Overbought overreaction: short BYND 138c June 14
BYND reported earnings with a wider loss in the first quarter of 2019 due to higher costs and expenses, but outstanding guidance for next year. Even bullish analysts have set price targets below the current market price of $135. JPMorgan is overweight with a $120 price target, Bernstein rates outperform with a $107 price target, Credit Suisse sets a price target of $125, Goldman set a target of $76 and BoA Merrill Lynch sets a price target of $101. Competition is also increasing in the already-crowded space. Nestle announced earlier this week that they will launch a plant-based burger, dubbed "the Awesome Burger." Burger King in in the process of adding the Impossible Foods burger nationwide and Tyson Foods is creating a plant-based protein that is mirrors Beyond's offerings.
Beyond Meat is only one brand in a very competitive space. This huge jump of over 35% after reporting more losses, yet a "positive outlook" despite increasing vehement competition is an overreaction. The RSI indicators show a reading of a whopping 81, indicating that BYND stock is extremely overbought. BYND is also trading outside of the bollingers, making it fit for mean reversion. The MACD indicator also shows that the momentum is waning. The Parabolic Stop and Reverse indicator is now above the candles, indicating a bearish movement to come. We are thus shorting the 138 calls with June 14th expiry (next Friday). This benefits from the expensive contract prices because of high implied volatility, and the near-term expiry thus allows us to collect theta premium.
Beyond Meat is only one brand in a very competitive space. This huge jump of over 35% after reporting more losses, yet a "positive outlook" despite increasing vehement competition is an overreaction. The RSI indicators show a reading of a whopping 81, indicating that BYND stock is extremely overbought. BYND is also trading outside of the bollingers, making it fit for mean reversion. The MACD indicator also shows that the momentum is waning. The Parabolic Stop and Reverse indicator is now above the candles, indicating a bearish movement to come. We are thus shorting the 138 calls with June 14th expiry (next Friday). This benefits from the expensive contract prices because of high implied volatility, and the near-term expiry thus allows us to collect theta premium.
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