Why Beam Therapeutics (BEAM) Is the Worst ARK Stock to Buy According to Short Sellers

Beam Therapeutics (BEAM) has been a darling of the investment community, particularly among those following Cathie Wood's ARK Invest. However, short sellers seem to have a different perspective on the biotech company, making BEAM the worst ARK stock to buy from their viewpoint. This article explores the reasons behind short sellers' bearish stance on BEAM, focusing on clinical trial results, regulatory approvals, competition, and valuation metrics.



1. Clinical Trial Results and Regulatory Approvals: Short sellers are concerned about potential setbacks in BEAM's clinical trials and regulatory hurdles. As of Dec 11, 2024, BEAM's stock price is $24.22, with a 12-month forecast of $47.67, indicating a 66.49% upside. However, short sellers may be betting against BEAM due to uncertainties in its clinical trials and regulatory approvals. For instance, BEAM-101, a treatment for sickle cell disease, has shown promising results, but its long-term efficacy and safety remain unproven. Additionally, BEAM's base editing technology is novel, and regulatory approvals may face delays or require additional data. Short sellers may be positioning themselves for potential clinical trial failures or regulatory setbacks.

2. Competition in the Gene-Editing Space: Short sellers' negative outlook on BEAM may also be influenced by the company's competition in the gene-editing space. With CRISPR Therapeutics (CRSP) and Intellia Therapeutics (NTLA) also focusing on base editing, short sellers might view BEAM as facing intense competition. Additionally, the recent appointment of Sravan Emany as CFO and Chirfi Guindo to the board could signal strategic shifts, further fueling short sellers' concerns about BEAM's competitive position.



3. Revenue Growth and Profitability: Beam Therapeutics' revenue growth and profitability lag behind other ARK stocks. In 2023, BEAM's revenue increased by 520.01% to $377.71 million, but it still trails ARK's top holdings like Tesla (TSLA) and Square (SQ). BEAM's losses also widened to -$132.53 million, indicating a lack of profitability. In contrast, ARK's top holdings have consistently reported profits.



4. Valuation Metrics: Beam Therapeutics (BEAM) stands out among ARK stocks due to its significantly higher price-to-book ratio (5.356) and price-to-sales ratio (2.191), indicating a higher valuation compared to other ARK holdings. This is likely due to its innovative base editing technology and promising pipeline, but it also exposes BEAM to greater downside risk if expectations aren't met.



In conclusion, short sellers' concerns about Beam Therapeutics' clinical trial results, regulatory approvals, competition, and valuation metrics make BEAM the worst ARK stock to buy from their perspective. While BEAM's innovative technology and promising pipeline have attracted many investors, short sellers seem to be betting on potential setbacks and increased competition. As always, investors should conduct thorough research and consider multiple perspectives when evaluating market trends and making investment decisions.