Shares plant-based food company Beyond Meat Inc. (NASDAQ:BYND) on Monday gained 10% after Bernstein analyst Alexis Howard gave a buy recommendation. The analyst cited multi-state re-openings and an expectation of increased sales as the reason behind the rating change
Bernstein’s outperform rating also came with a price target of $130.00, which implies an upside potential of more than 20% 22% upside on Friday’s close of $106.59. Shares of the company closed at $117.25 on Monday, which means that there is still room left to run before it reaches the targeted price.
Can BYND return to profitability?
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Beyond Meat missed revenue and earnings expectations for the most recent quarterly results released earlier this month. The company posted an 11.4% increase in revenue from last year while the bottom line plunged to an adjusted loss of $0.42 per share down from $0.03 earnings per share.
The company provided guidance of a 32% rise in sales for the current quarter but shied away from issuing full-year guidance amid the unpredictability of the pandemic. However, the Centre for Disease Control and Prevention (CDC) relaxed restrictions on mask wearing is a natural catalyst for the food industry.
As such, the company’s second-quarter guidance on sales could prove to be an underestimation. This could, in return, help push Beyond Meat back to profitability sooner than expected, thereby boosting the BYND stock price.
Technical overview
Technically, Beyond Meat stock appears to have recently bounced back after a huge pullback in May. The stock price has since crossed to the overbought levels of the 14-hour RSI.
The Relative Strength Index measures the level of the market sentiment. The mid-section indicates that there is no bias to the bullish or the bearish side of the market. Granted, the RSI indicates a short-term pullback may be seen as some take their profits off the table. If you have already bought BYND stock and are looking to take a short-term profit, key targets to look out for are resistance levels at $128 and $136.
BYND stock is a particularly strong buy if it drops to support levels of $108 and $99.84.
The bottom line: There is room left to run for BYND stock
Although shares of Beyond Meat stock have recently hit overbought levels in the RSI, the company’s fundamental outlook is in part directly correlated to the easing of the COVID-19 crisis. Taking a look at the most recent data shows daily new COVID-19 infection rates are trending near the lowest levels seen in 11 months while daily vaccination rates averaged 1.8 million diseases a day over the past week.
Bottom line, BYND stock is likely to experience a short-term pullback after hitting overbought levels. But investors should take advantage of any weakness and focus on the long-term bullish picture as the stock has a lot of catching up to do before retesting its all-time highs of more than $210 per share.
