Former Rockstar stocks Tesla, Beyond Meat, Virgin galactic selling off fast

Tesla, Virgin Galactic, Beyond Meat

The first two months have been quite challenging for the stocks of many companies who started out the year well with a financial target by the end of the quarter. This is mostly a result of the coronavirus outbreak which has had a great impact on the stock market. Where stocks of some companies plummet, the stocks of other companies surge especially pharmaceuticals and biotech companies who have taken it upon themselves to develop in collaboration with the National Institute for Allergy and Infectious Diseases (NIAID) and the US Department of Health and Human Services (HHS).

Analysts believe that the major thing Rockstar stocks like Tesla (TSLA), Virgin Galactic (SPCE), and Beyond Meat (BYND) have in common is the fact that they are overvalued, and it will only be a matter of time before their stock prices fall. Indeed, their stock prices have experienced a wind of change—dropping from different highs, and a contributing factor to this is the coronavirus impact on the market. Nonetheless, the degree to which their stocks have dropped cannot be compared to many under-performing stocks.  As of Friday, the Dow was down 2.9%, S&P was down 2.3%, and Nasdaq off 1.6%.

In the past week, Tesla (TSLA) and Beyond Meat (BYND) have experienced a lot of shorting especially Tesla. What seemed to be like a great strategy failed this time around as a result of heavily shorting stocks. Investors have not only caused the stock values to rise further but also, cause the prices to increase. Therefore, to avoid losing out on what the short-sellers assumed to be a profitable strategy such investors would have to move quickly to avoid incurring huge losses, this act is called a ‘short squeeze’.

Tesla (NASDAQ: TSLA)

Tuesday Closing Price: $745.51

Percentage Increase: +1.89 (0.25%)

As of January 30, Tesla’s shares were up over 40% and causing the percentage increase of its shares was the report of its fourth-quarter sales and revenues that beat the forecast. Following Toni Sacconaghi’s rating of Tesla’s stocks, the electric car manufacturer’s shares experienced a surge in its prices.  Sacconaghi said it didn’t see any negative catalyst that posed as a threat to the performance of Tesla’s stock. He supported his claim by almost doubling its price target. As a result of this, Tesla’s stock which had dropped to +5.81% rose 7.5% to $860.00 intraday day, before lowering gains of 5.8% in midday trades.

It has been a heck of a rollercoaster ride for this electric vehicle manufacturer as its share prices continue to rise and fall amid the recent stock market plunge. Tesla’s stock which rose 50% in January, fell 23% by the first week of February and has since shuffled between prices since then. Its percentage increase saga began in October of the previous year, causing a 30% increase from its third-quarter reports. As of when its fourth-quarter report was released, Tesla’s shares increased over 10% in one day, with its revenues and cash flow exceeding Wall Street’s expectations.

In the first week of February, the company had an all-time high of $968.99 per share—over a 50% increase. The all-time high was short-lived as it plummeted 23% selling at $748 per share by the end of the week. Between February 3 and March 2, Tesla’s all-time high is $968.99 and its lowest price being $611.52. Having a difference of $357.47 and an average of $794.76. Its percentage change revolves around 14.30%.

On Thursday, Tesla announced a $2 billion stock offering which caused it shares to jump and analysts are closely following up on this recent development. Aswath Damodaran, professor at NYU Stern School of Business describes this development and Tesla as his “corporate teenager,” he further added that “Every day I wake up and it’s got lots of potentials and then it says, “What can I do today to screw it all up?” That’s not going to change today, it’s not going to change next week… when you have a story stock and the mood is right it doesn’t really matter what the fundamentals are, people are going to push up the price. That’s scary if you’re an investor, but if you’re a trader this is your bread and butter.”

Contrary to Damodaran’s opinion about this, Dan Ives, managing director at Wedbush Securities is quite optimistic about this recent development saying that “I think when you look at the situation for Tesla… it’s a smart strategic move… This, from a broad perspective is something, and even for the bulls. I think the Tesla story potentially changes with this in terms of now what’s happened with the balance sheet.”

Virgin Galactic (NYSE: SPCE)

Tuesday Closing Price: $24.71

Percentage Increase: -1.27 (4.89%)

Virgin Galactic suffered a few backlashes after it reported a loss greater than the anticipated amount after it had released its fourth-quarter report. The company reported an EBITDA loss of $55 million, about $8 million higher than the expected $46.9 million loss. In its Q4 report, it reported a revenue of only $529,000 which was far lower than the accumulated $800,000 revenue in its third-quarter. The company reported a total annual loss of $210.9 million in 2019 alone. Though, it hopes to be profitable in the year to come.

As a result of all these, a few analysts are calling Virgin Galactic stock a bubble and it has since become the new favorite speculative stock on Wall Street. The company’s Chairman Palihapitiya begs to differ on this as he says that Virgin Galactic stock isn’t a bubble making reference to the $2.4 billion the company will incur from the 8,000 people who want to fly to space.

Its stock has surprisingly tripled in the past 3 months and up 298% at the close of Wednesday’s market. Somehow, Virgin Galactic’s stock was one of the top-buying stocks last week Tuesday, beating Tesla and Apple, this was stated in a CNBC report. When asked about the possible factors that drive the company’s shares higher, Palihapitiya mentions driving factors such as the high customer demand and the recent US market conditions. In a statement on CNBC, he mentioned that “There’s a setup in the market where there’s no real growth, there’s no unique stories and there’s nothing that can give you long-term outlook.” A few analysts and experts have said that these words spoken by Palihapitiya are clear indications of a bubble. More reactions came up after the chairman compared Virgin Galactic to Tesla saying that the Virgin Galactic stock rally also concerns Tesla and “those two things are the most similar stories.”

In trading on Wednesday, Virgin Galactic’s shares were up 23.3% to close at $37.35, setting a new all-time high. It also doubled as the stock’s single best day of trading.

In spite of the “bubble” allegations against this space company, the demand amongst potential customers continues to rise after it was reportedly stated that Virgin Galactic had received 7,957 “registrations of interest” in December 2018, and the number continues to increase. Palihapitiya roughly estimates the number to 8,000 potential customers and also mentions the “if those 8,000 people—just those 8,000 people—it doesn’t seem like a lot but, when you think that the price could be around $300,000, that’s $2.4billion of pipeline.” Though the original amount of the space flight tickets has not been disclosed, it is anticipated to fall between $200,000 to $300,000.

As regards Virgin Galactic’s business operations, Palihapitiya says that the company is “making amazing progress.” Further stating that in as much as the company’s timeline for starting commercial operations may have been delayed, it is certain that commercial flights would begin in the first or second quarter of the year with a target of 16 flights for the whole year. However, its commercial operations will not begin until it has successfully and safely flown its founder, Sir Richard Branson to space.

During the company’s conference call that one of its goals is to safely fly its founder, Richard Branson to space. Also stating that the long-term success for the company isn’t necessarily about generating revenue but on safely flying to space. Following this, the company announced on Wednesday last week its intentions of accepting $1,000 deposits of space flight tickets. It hopes to re-open ticket sales in the latter part of the year and it promises that those who pay the refundable deposit in full will be the first to secure a spot. The $1,000 is merely not the price of the flight ticket but also double as a means of customer identification especially the ones who would like to upgrade to premium for the next batch of sales.

In a nutshell, Virgin Galactic’s stock has jumped to record multiple highs in the past weeks, beating Tesla. Tesla is up more than 91% year-to-date while Virgin Galactic is up nearly 150%. The shares of Virgin Galactic have since gone up 26% to $35 per share.  

Beyond Meat (NASDAQ: BYND)

Tuesday Closing Price: $95.43

Percentage Increase: -0.67 (0.70%)

The plant-based meat substitute company at the close of Thursday’s market reported its fourth quarter and 2019 FY results. By Friday, its shares were down 17% while the S&P 500 was also down 2.6%. On one hand, the inability of the company’s quarterly earnings to meet up the Wall Street’s consensus estimate and the low turnout of its EBITDA can be said to be factors that contributed to the drop in its company’s stocks. On the other hand, part of Beyond Meat’s recent stock underperformance can be attributed to the overall market plunge caused by the coronavirus outbreak.

Before its Q4 report release, Wall Street was banking on a $0.01 earnings per share (EPS) on a $77.9 million revenue. Though it didn’t meet up to the profit expectation of Wall Street, it still went above the average line. For the whole 2019 FY, the company reported a 239% increase year-over-year to $297.9 million with a total net loss of $12.4 million or $0.29 per share. While for fiscal 2020, Beyond is expected to generate a total revenue between $490 million and $510 million.

The company attributes its Q4 revenue growth to the “increased sales to international customers, expansion in the number of points of distribution, including new strategic customers, higher sales velocities at existing customers, and contribution from new products introduced in 2019.”

Despite all these, shares of Beyond Meat dropped 18.8% in February based on the S&P Global Market Intelligence data. This came after the company reported a loss in its fourth quarter. This got a lot of investors really concerned, not to the fact that the company wasn’t doing good enough, but that it’s increased spending would hinder the earnings to increase beyond measures. Its research and development costs alone, increased by 80% in the fourth quarter. It still intends to spend more on research and development in the coming quarters. Some investors do not have an issue with the company’s upcoming innovations, the main concern is the company’s ability to generate higher earnings once the innovative process is completed.

In spite of its February loss, the shares of Beyond Meat are still up 27% and Wall Street is expectant of a 7.7% upside. The company also has a target of $490 million to $510 million total revenue in fiscal 2020.

The company announced that it would adjust its full-year 2020 EBITDA, with hopes to channel its focus towards marketing, research and development, and internal expansion. With this in consideration, it is not expected that the percentage of revenue would move higher than the previous year.

Asides that, the company still has a few credits to it such as its gross profit rising to $33.5 million in the fourth quarter from the $7.9 million at the beginning part of the year. Another credit given to the company is that is made gains in fresh products which include the ‘Beyond Burger’. Making gains in its fresh products is quite significant to the company because its fresh products cost more than its frozen products.