The US stock market declined in May as US-China trade talks remained the dominating theme, with earnings, interest rates, and Brexit also impacting investor sentiment.
The tech-heavy NASDAQ Composite declined the most among the three benchmark indexes, falling by 7.41% mainly on the back of trade concerns. The S&P 500 and Dow Jones Industrial average lost 5.87% and 6.11%, respectively.
The month kicked off with the Federal Open Market Committee maintaining interest rate levels. Markets reacted positively to the decision as well as the Fed’s statement that economic growth and job creation were somewhat stronger than anticipated. April non-farm payroll data showed 263,000 jobs created, much higher than the expectation of 180,000 and the previous month’s figure of 189,000. First-quarter GDP grew by 3.1%, beating the consensus estimate by 0.1 percentage point.
Meanwhile, US-China trade talks seemed to move nowhere. Trade tensions increased after President Trump said China “reneged” on its promises to make changes to its economic practices and slapped tariffs of up to 25% on $200 billion worth of Chinese goods. Beijing retaliated by targeting $60 billion worth of US goods. Eyes are now on the G20 summit in Osaka at the end of June, where President Trump and China’s leader Xi Jinping are expected to meet.
On the other side of the Atlantic, Brexit drama continued to unveil. After appealing to the Parliament with a new repackaged deal and failing to win support, British Prime Minister Theresa May announced that she will resign on June 7. There are 13 people that declared their intention to run for the opening, including one of the main proponents of Brexit, former Foreign Secretary Boris Johnson, who is currently the frontrunner.
In the meantime, several individual stocks were dominating headlines on the back of various developments, some of which attracted the attention of Financial Advisors. According to the list of the 20 most researched tickers compiled by TrackStar, InvestingChannel’s official newsletter capturing and analyzing the trends of Financial Advisors, Tesla Inc. (NASDAQ: TSLA) was the most researched stock among Financial Advisors last month.
Tesla has been in hot water lately over its intention to significantly cut costs and concerns about the demand for their Model 3 car. Several analysts provided updates on the stock, including Morgan Stanley, which slashed its bear case for the stock to just $10 from $97, suggesting that the carmaker may have reached market saturation. Nevertheless, Morgan Stanley maintained their bull-case target and main price target at $391 and $230, respectively.
In the second spot on TrackStar’s list was Apple Inc. (NASDAQ: AAPL), which reported better-than-expected results for the first quarter and posted a positive guidance for the current quarter.
We are going to focus on Beyond Meat Inc (NASDAQ: BYND), a producer of plant-based meat substitutes. The company went public on May 2, pricing its IPO at $25 per share. The stock opened at $46 and surged by 163% at the end of its first trading session, making it one of the most successful recent IPOs. The stock continued to climb and passed the $100 mark at the end of May.
However, a lot of the stock’s appreciation is due to aggressive market growth expectations. The company, currently valued at over $6 billion, generated less than $90 million in revenue in 2018. Analysts anticipate revenue of $38.93 million for their upcoming earnings release.
One positive catalyst for Beyond Meat is the increasing interest in meat alternatives, which captured the attention of large retailers and even fast-food chains like McDonald’s Inc. (NYSE: MCD), Burger King, and KFC. After Beyond Meat’s IPO, Canadian fast food chain Tim Hortons said it would test plant-based sausage breakfast sandwiches at several dozen locations in Toronto with plans to go national.
However, analyst opinions on the stock are mixed. On May 28, JPMorgan initiated coverage on the stock with an ‘Overweight’ rating and $97 price target, saying that the company will beat revenue expectations this year. On the other hand, notorious short-seller Citron Research, called the company “Beyond stupid” tweeting: “Most heavily traded retail stock on Robinhood, market cap now bigger than industry, and superior competitor coming to market soon. We expect $BYND to go back to $65 on earnings On retail exhaustion.”