Analyst's Squeeze Play: Can Beyond Meat, Aurora Cannabis Juice The Shorted Stocks?

A short squeeze forces investors betting on a stock's decline (short sellers) to buy back shares at a higher price to avoid losses, triggering a price surge. Analyst Faizan Farooque sees this potential in Aurora Cannabis ACB and Beyond Meat BYND due to their recent actions and current market conditions.

Beyond Meat 

Beyond Meat is facing a challenging environment with persistent inflation, competition from Impossible Foods and a notable drop in plant-based meat revenues.

The company's net sales fell 18%, resulting in a net loss of $155.1 million. Despite these setbacks, Beyond Meat projects sales of $315 million to $345 million for 2024.

To counter these challenges, Beyond Meat introduced Beyond IV, a new product line boasting 75% less saturated fat and 20% less salt than traditional beef, and containing 21 grams of protein per serving.

According to Farooque, the company is focusing on inventory optimization, discontinuing Beyond Jerky to prioritize the more profitable Beyond IV line. Additionally, BYND is cutting its 2024 budget by $70 million as part of its SKU rationalization process. Currently, the stock has nearly 40% short interest and has dropped almost 50% in the past year.

Aurora Cannabis 

Aurora Cannabis continues to be a notable name in the short-squeeze arena, largely due to marijuana's federal illegality in the U.S. However, Farooque noted Aurora reported its fifth consecutive quarter of positive adjusted EBITDA, with quarterly net sales up 5% to 64.4 million CAD.

The company is also reducing its debt, recently repurchasing 23.1 million CAD in convertible debentures.

Despite these positives, consumer cannabis revenue fell by 21% year-over-year, and adjusted SG&A expenses remained high, according to Farooque.

He explained a reverse stock split in February 2024 aimed to stabilize the stock price, but ACB is still trading at $5.90, well below its 52-week high of $11.5.

The Canadian market's slow growth further complicates Aurora's position, keeping it among the stocks primed for a squeeze.

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Photo by Tangerine Newt on Unsplash.