When it comes to penny stocks, sentiment is a big thing. I’m serious. You could have a relatively quiet day in the works when suddenly, a small piece of news sends a group of penny stocks soaring. The interesting part (if you’re new to penny stocks) is rarely does the information have anything to do with the companies breaking out. In the “biz,” we call this sympathy trading. At heart, traders look for companies that could be the same or similar to the ones named or referenced in headlines.
Sometimes is broader and more industry-based. Other times it’s more niche and company-based. Take, for instance, the move that most oil and gas penny stocks made a few weeks ago. Russian energy sanctions brought about a big focus on energy stocks. First, the groundswell began with market leaders. Then retail traders started looking for cheaper options. Sure enough, a sweeping bullish trend ignited big moves in oil, gas, and even alternative energy penny stocks.
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But it’s not just energy or specific industries. If it’s one thing the Ape Movement has taught us, it’s that anything can be a sympathy catalyst. Is a company breaking out because of a short squeeze? If it is, there’s a good chance other stocks with higher short interest will follow the trend. Has a low float penny stock soared hundreds of percentage points within a matter of minutes? If so, then the chances are that traders will be on the hunt for more low float penny stocks.
Beyond Meat (BYND), McDonald’s (MCD) & “Alternative Facts”?
This brings me to this week’s sympathy catalyst that sent a few penny stocks for a loop. Initially, a report from Fast Company indicated that the McPlant Burger would become a permanent menu item at McDonald’s. This news originally sent shares of BYND stock and a slew of alternative food penny stocks surging. In particular, Beyond Meat (NASDAQ: BYND) shares jumped to highs of $47.44. This is a level that the fake meat company’s stock hadn’t traded at since early April. Heavier short interest was also playing a part in the technical side of the speculative activity in the stock market today.
Data from Fintel.IO, the short float percentage on BYND stock sits at 38.84%. This brought the attention of short squeeze traders and those looking for a reason for Beyond Meat to heat back up again.
As discussed above, sympathy trading eventually ensued and showed as a positive trigger for several penny stocks:
- Oatly Group (NASDAQ: OTLY): An alternative dairy company that has struggled since its 2021 IPO. Shares of OTLY stock popped to highs of $3.70 during the Wednesday session.
- Benson Hill Inc. (NYSE: BHIL): A company focused on utilizing technology and data science to help create sustainable food and ingredient options. BHIL stock jumped to highs of $3.71 amid the flood of attention to vegan-friendly stocks.
- Laird Superfood Inc. (NYSE: LSF): Plant-based consumer products company specializing in functional food. Offerings focus on environmental consciousness and “responsibly tested” ingredients. LSF stock jumped to highs of $2.69 during the Wednesday session. LSF is another penny stock that has been in a freefall since making its public debut.
What Happened With BYND Stock & McDonald’s?
Shares of Beyond Meat stock surged on the back of a report from Fast Company. The outlet discussed apparent evidence that the Beyond Meat-based McPlant burger would become a permanent menu item at McDonald’s (NYSE: MCD). This would be a big win for the fake meat company and add to a growing list of other restaurants and grocery stores offering a meatless option using Beyond Meat products.
Some of the current restaurant brands on the roster include select Denny’s, A&W Root Beer, Del Taco, TGI Fridays, Carl’s Junior, and BurgerFi. Others have also tested the product in different stages, while competitors like Impossible take on additional market share from the likes of Burger King, Cheesecake Factory, Red Robin, Umami Burger, White Castle, and Fat Burger, among others. This news of a permanent place on the McDonald’s menu suggested a substantial shift in fast-food chain offerings.
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In a flurry of news-fueled trading action, BYND stock was halted several times, and continuous newsflow shifted sentiment. Ultimately, Bloomberg would refute the statements and bring clarity to the situation as a whole. McDonald’s called the Fast Company report “misconstrued,” and shares swiftly pulled back along with other vegan stocks like the ones mentioned above.
Where Does BYND Stock & Other Penny Stocks Go From Here?
Earlier this year, McDonald’s began expanding its Beyond Meat-based McPlant burger test market. This roll-out brought the product to roughly 600 San Fransisco and Dallas-Fort Worth locations.
But the future of the McPlant is a coin-toss, according to some analysts. BTIG analyst, Peter Saleh, has explained in the past that channel checks show the McPlant is not McPerforming. “[Frichisees] assessment was that they don’t see enough evidence to support a national rollout in the near future and that lower sales volumes were slowing down service times, as the product was being cooked to order,” the analysts wrote in a note. “We expect McDonald’s will continue to tweak and test the McPlant in a handful of markets in an effort to build broader appeal…Additionally, we expect Beyond Meat to invest more aggressively in marketing its message, while at the same time working to reduce the cost per pound to franchisees.”
Beyond Meat is slated to report earnings for its first quarter of 2022 next month. McDonald’s reported earnings this week, beating EPS and sales estimates for Q1. However, in commentary from CEO Chris Kempczinski, no mention of McPlant products was mentioned. Kempczinski specifically stated, “In most of our major markets, we sustained QSR traffic share gains by focusing on elevating our brand, accelerating digital channels, and showcasing our core equities of chicken and beef.”
Regardless, the Beyond Meat saga may go well beyond this week as this head fake has piqued investors’ interests.
