Beyond Meat (NASDAQ:BYND) seemed like it was the hottest stock on the board…but it was overhyped and is overvalued.
Its innovative “plant-based meat” is now found in the frozen food section of thousands of grocery stores. Carl’s Jr., Del Taco, and a few other restaurant chains sell its products, too.
It supposedly tastes just like real meat, but is better for animals and for the environment. Many investors expect plant-based meat to be the “next big thing.” I believe it is another Green based Orwellian vegan fad.
The chart below says it all.
Beyond Meat’s stock shot up 840% after going public on 2 May.
It is the Top-performing IPO of the year and one of the best of all time.
For sure, Beyond Meat’s 840% gainer in those few short months is an outlier. But it is not that uncommon for stocks to skyrocket shortly after going public. The average return for a US IPO last Quarter was 30%.
Beyond Meat introduced plant-based meat to the masses. But do not forget that plant-based meat is a commodity that is easily replicated.
Commodities that can be easily replicated compete on price. That is a big problem for Beyond Meat because its products are expensive.
Its hamburger cost anywhere from 2-3X what real hamburger costs.
Beyond Sausage, another one of its products, sells for around $10.30 per pound. That’s 70% more than what pork sausage sells for.
Such prices are not sustainable, competition is already heating up.
Impossible Burger also sells plant-based burgers. You can buy its products at more than 9,000 restaurants, including Qdoba and Burger King.
Tyson (TSN) the largest US meat producer is also developing its own line of alternative meat products. It was an initial investor in Beyond, but sold its stake in April.
Nestle, the world’s largest food company has entered the plant-based market, too. It’s selling its “Incredible Burger” in Europe already. The company plans to introduce this product to America this Fall.
And now, JBS, the world’s largest meat producer is also looking to launch a plant-based meat product in Brazil this year.
These companies have deeper pockets and better distribution than Beyond Meat. They can develop new products and bring them to market much faster than Beyond Meat.
Perhaps most importantly, they charge less than Beyond Meat.
This will force Beyond Meat to either cut prices or surrender market share. Both Very Bearish for investors.
It trades at a price-to-sales (P/S) ratio of 87. Investors are paying $87 for every $1 that Beyond Meat generates in sales. Silly!
Tyson trades at a P/S of 0.73. Conagra Brands (CAG) trades at 1.5X sales. And General Mills (GIS) trades at 0.4X sales.
The Big Q: Should Beyond Meat trade at a premium because it’s a disruptor stock changing the way we eat?
Beyond Meat will not live up to it silly valuation, that does not mean Beyond Meat will disappear, but the steam will fade.
When that happens, its stock will continue due South. So, do not be surprised if BYND falls another 30-50% or more once investors realize powerful competitors are coming for its market.
Tick=Tock, once investors wake up to the competition Beyond Meat faces, its stock dives deep.
HeffX-LTN’s overall technical outlook for BYND is Bearish to Very Bearish, there is no strong support for the shares till Zero and the resistance is Strong at 166.22.
Eat healthy, Be Healthy, Live lively