After jumping nearly 10-fold from its IPO price, Beyond Meat (NASDAQ:BYND) cratered 68%. Going forward, its going to be tough sledding for BYND stock.
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It is easy to focus too much on the merits of fake meat in a culture that yo-yos between plant based Vegan diets and low-carb diets like Paleo and Keto. The science is far from settled on the perfect diet for health and longevity. But the question isnt whether meat alternatives are the cure-all for heart disease and other preventable diseases. Its whether Beyond Meat has a clear path to success.
Taking a look at the competitive environment, I wouldnt bet on it. Beyond Meat may secure some status as a niche purveyor of plant-based meat products, but if this trend reaches critical mass, behemoths in the food products business will go big, impacting BYNDs competitive advantage.
Does that make BYND stock a hard sell? At the current valuation, investors may be getting ahead of themselves with this plant-based story stock.
When it comes to plant-based diets, obviously health is top-of-mind. The work of health experts like Ancel Keys gave credence to the theory that high-saturated fat consumption (red meat, eggs) causes heart disease.
By the 1980s, the science was settled. It even made for a Time Magazine cover that todays keto crowd would find laughable. In the decades that followed, chicken sales skyrocketed.
The animal fat-friendly Paleo and Keto diets are not the first to tout the benefits of red meat and eggs. But unlike the eat-a-packet-of-hot-dogs Atkins diet of yesteryear, these diets focused more on consuming unprocessed foods. Paleo and Keto also emphasize the importance of lower-glycemic vegetables like spinach and kale.
By 2014, even Time magazine was telling you to eat butter again. But what does this have to do with BYND stock? Experts on the other side make valid points, calling the whole plant-based is better, case closed thesis into question. Yet, with the meme of red meat clogs your arteries still in the public consciousness, Beyond Meat stock may still benefit.
Even in a highly processed form, the general public may regard fake meat versions of burgers and steak as healthier. With regards to BYND stock, whether this is scientific fact or fake news is not important. Public perception, not settled science, has the last word.
All bets are off whether plant-based diets will reign supreme in the 21st century, but Beyond Meat doesnt hold the franchise on alternative protein products. As InvestorPlaces Will Healy discussed, Kellogg (NYSE:K) and Hormel (NYSE:HRL) are throwing their hats into the ring. Tyson Foods (NYSE:TSN) is also heavily invested in plant-based alternatives.
Beyond Meats total share of the plant-based meat market is only 2.1%. Even if bullish sales projections pan out, the companys 2025 market share will only be 13%. But speculation, not fundamentals, drive Beyond Meat stock. Given that competitors like Impossible Foods remain privately-held, BYND is your vehicle to make a bet on the future of fake meat.
Hence, despite recent declines, BYND stock trades at a high valuation. Shares trade at 223 times their projected 2020 earnings. Even if the companys explosive growth projections become reality, this valuation remains far from rational.
It also sets the bar very high for Beyond Meat stock. In order to justify its valuation, the company does not only have to win over a large segment of the meat-free population. Beyond Meat must win over meat-eaters, with a compelling alternative.
If purported health benefits do not do the trick, price may be the key to win the hearts and stomachs of the general public. But unless Beyond Meat scales up significantly, legacy food producers like Tyson could have the upper hand once plant-based meat is cheaper to produce.
Despite my own admitted bias, plant-based protein may prevail. But that doesnt mean BYND stock will be a winner in the meat wars. Once we embark on a brave new world of plant-based protein, big food companies like Tyson and Hormel have a clear edge.
Beyond Meat stock tumbled 22.2% this Octiober when 80% of outstanding shares became free to trade. But shares could fall further, as the smart money cashes in their chips. Now that theres more available float, theres less risk of a short-squeeze.
But tread carefully before making a bearish bet. While BYND stock remains frothy, that doesnt mean the party is over just yet.
As of this writing, Thomas Niel did not hold a position in any of the aforementioned companies.
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BYND Stock Could Fall Further as Competition Heats Up - Investorplace.com
