Appetite for Beyond Meat's plant-based burgers is shaky. But traders seemed to love the stock.
The company's shares soared more than 1,000% in four days, a staggering rise for a company whose share price has all but fallen since its stock market debut six years ago.
The business has been struggling with sluggish sales and hasn't posted a quarterly profit in more than five years as shoppers turn away from meat alternatives.
The surge has renewed debate over whether the activity, fueled in part by Internet enthusiasm among everyday investors, is a sign of an overly frothy stock market.
Beyond Meat shares surged as much as 112% on Wednesday, extending gains from the previous three trading sessions and briefly pushing the share price above $7.
But after a volatile trading day, the gains faded and shares fell about 1% to close at about $3.60.
Momentum began to pick up last week when a Reddit user helped spark a wave of buying by comparing it to other so-called meme stocks such as GameStop And AMC.
The rally continued after Roundhill Investments on Monday added the company to the list of companies owned by its meme fund ETF, or exchange-traded fund. The move appears to have triggered a so-called short squeeze: As the share price rose, many investors who had bet against the company were forced to buy shares to cover their losses.
The company also announced a distribution deal with Walmart on Tuesday, further boosting its stock.
“It wasn't that long ago that this company was thought to be going bust,” said Mark Hackett, chief market strategist at Nationwide.
“Getting a positive catalyst like the Walmart deal, which could have transformative effects with demand returning and getting products into the hands of consumers, is certainly a trigger,” he added, referring to the stock's rally since last Friday.
But Mr. Hackett cautioned that Walmart's deal to expand distribution “won't necessarily solve all the problems.”
“You're really trading on emotion and technicalities rather than fundamentals,” Mr. Hackett said.
The company is still in a precarious position. Its share price remains well below its all-time high of more than $230 in 2019.
Beyond Meat stock rises amid… nervousness background about an overvalued stock market.
Concerns about a possible bubble in the artificial intelligence (AI) industry are coming to the fore. Those concerns have intensified as analysts try to understand how the massive amounts of money the biggest players are throwing at each other fit together.
JP Morgan Chase CEO Jamie Dimon repeated concerns this month. He told the BBC he was “much more concerned than anyone else” about a major market correction, which he said could happen in the next six months to two years.
The Securities and Exchange Commission also flagged potential market manipulation associated with meme stocks, warning of risks for everyday investors.
Some have responded with calls for stricter rules on short selling and social media trading. However, there are no signs that such proposals are gaining traction.