Small caps last week: Burry's new bet, Beyond Meat spiraling, Spirit out of business

A collapse in Spirit Airlines shares after the low-cost carrier halted operations, a rally in Firefly Aerospace on all-time-high revenue and inclusion in the U.S. Golden Dome missile-defense program, Michael Burry’s bet on scientific-equipment maker Bruker, and another sharp selloff in Beyond Meat after a weak guidance were among the biggest stories in the small-cap sector this week, from May 4 through May 8.

Low-cost airline Spirit Airlines on Monday announced the immediate wind-down of its operations. Spirit had spent the last year and a half attempting to restructure its business, but the recent material increase in oil prices and the U.S. government’s refusal to provide financial assistance significantly darkened its outlook. Against that backdrop, Spirit shares collapsed – they are now down roughly 98% over the last year and trading at penny-stock levels.

Spirit, a pioneer in budget air travel, in recent years has faced mounting competition from major carriers offering cheap fares, sharply rising labor costs, and engine issues that forced dozens of the airline’s aircraft out of service.

For more on the Spirit story: Oninvest's Ivan Lapshin looks at how other airlines are coping with rising aviation fuel prices.

Firefly Aerospace, a developer of launch vehicles and orbital spacecraft, announced that its subsidiary would participate in the U.S. missile-defense program Golden Dome. On the same day, the company reported a 40% year-over-year increase in quarterly revenue to a record $80.9 million, above Wall Street expectations. Against that backdrop, the shares surged nearly 9% in premarket trading on Tuesday, though they later lost about 5% by the close of regular trading.

Firefly’s net loss for the quarter widened nearly 61% to $96.7 million. Barron’s noted that investors are currently more focused on sales growth than profitability. In addition, this spring the company successfully launched a rocket that reached orbit and delivered a demonstrator payload for Lockheed Martin, the largest U.S. defense contractor. Year to date, Firefly shares have surged more than 77%. The stock has five Wall Street “buy” ratings versus three “hold” ratings. The average target price stands at $46.75 per share, implying upside of nearly 18%.

Preparations for an IPO by Elon Musk’s SpaceX at a potential valuation above $2 trillion have boosted investor interest across the broader space sector. Analyst Aldiyar Anuarbekov has picked five small caps to gain exposure to the industry ahead of SpaceX’s public-market debut. 

Legendary investor Michael Burry has purchased shares in small-cap laboratory-equipment maker Bruker Corporation, saying he has “no doubts about the quality and resilience of the business.” He bought the company’s preferred shares (BRKRP), which carry an annual yield of about 6% and mandatory conversion on September 1, 2028.

Bruker manufactures high-tech scientific equipment used in pharmaceuticals, biotechnology, semiconductors, academic research, and clinical diagnostics. On Wednesday, the company released its first-quarter results – the first major test of Burry’s investment idea. Markets reacted positively: the stock rose more than 10% following the report.

Wall Street analysts track only Bruker’s common shares (BRKR). According to MarketWatch data, they have nine “buy” calls, six “hold” ratings, and just one “sell” recommendation. The average target price stands at $46.50 per share, implying upside of about 10.5%.

Beyond Meat said its revenue fell more than 15% in the last quarter to $58.2 million due to weaker sales of burgers and plant-based chicken alternatives. The company forecast that the figure could decline another 14-20% in the current quarter. Following the earnings, the shares plunged nearly 14.5% during trading on Thursday and lost another nearly 7% the following day.

Beyond Meat, once a promising startup backed by Leonardo DiCaprio and Bill Gates, has struggled for years amid weakening consumer demand for plant-based meat substitutes in the U.S. As a result, its shares repeatedly hit record lows last year. In October, however, the stock surged nearly 1,400% in four days after Reddit users described its products as “not just a veggie burger anymore, it’s a symbol of rebellion.”

The Motley Fool notes that the company is expanding its product lineup, but still advises most investors to avoid the shares because of intense competition in the market. Wall Street remains broadly negative on Beyond Meat stock, which has four “sell” and three “hold” ratings. The average target price stands at $0.66 per share, below the current share price.

First-quarter results from EV maker Lucid Group failed to meet analyst expectations. Although the company’s quarterly revenue rose 20% year over year, its operating loss widened 43% over the same period. The company also withdrew its vehicle-production guidance for this year. As a result, the shares fell nearly 5% in premarket trading on Wednesday, though they finished the regular session down about 1%.

Year to date, Lucid shares have plunged 40%. The Motley Fool wrote that a series of setbacks has undermined investor confidence in the EV maker: at times deliveries were disrupted due to supplier problems, while at other points new fundraising efforts raised concerns about dilution for existing shareholders. The stock carries nine “hold” ratings from analysts, alongside two “buy” and three “sell” recommendations. The average target price stands at $10.20 per share, implying upside of 62% from current levels.