Will This Fake Meat Stock Sizzle?
Plant-based products, including meat alternatives, have been booming — and it’s anything but a fad. By 2030, it is estimated that the plant-based meat market will be worth $24.8 billion, growing at a CAGR (compound annual growth rate) of 19.3%.
Impossible Foods has the largest brand name but a few big players have carved out meaningful market shares, including Beyond Meat.
Although it’s a name consumers have come to know within the vegan and vegetarian communities, Beyond Meat has continued to disappoint investors. What’s next for this fake meat stock? Can it recover?
Flashback To When Beyond Meat Sizzled
Beyond Meat (NASDAQ: BYND) made big waves following its IPO in May 2019. Initially offered for $25 per share, BYND had the biggest-popping IPO for a U.S. company since 2000. Shares skyrocketed by 163%. On the eve of going public, it showcased a market cap of about $1.5 billion before hitting $3.8 billion within hours of its debut.
By July 2019, shares of BYND were trading almost 10x higher than their IPO price at over $234. However, it’s been downhill from there. More recently, shares of BYND were selling close to their 52-week low of $35.74.
Over the last year, share prices have declined by nearly 70%, and over the past five years, they are down by nearly 40%.
Disappointing financial results have investors concerned. In the company’s final months of 2021, earnings, sales, and guidance were all a letdown. The company will need to focus on how to boost profitability to put investors’ minds at ease.
The company’s revenue was $100.7 million, representing a 1.2% year-over-year decrease. But the firm’s operating loss hit $77.7, and BYND’s net loss was $80.4 million.
There was little to highlight in the results, so Beyond Meat CEO Ethan Brown had some explaining to do. A key variable was the impact of COVID on labor availability, supply chain disruptions, and demand levels. Although these challenges are valid, they were not enough to alleviate investors’ fears. Those who have invested in the company want to see solid revenue growth and a narrowing net loss.
BYND Stock Is Down, But That Doesn’t Mean Buy
Plenty of stocks are on sale at the moment but BYND isn’t one of them. In spite of the share price decline already, we assess fair market value to sit at $35.46 per share, suggesting intrinsic value and the stock’s 52-week low are about equal.
With all the doom and gloom, is there any light on the horizon?
Indeed, there are some reasons to be optimistic as a current shareholder. Management recently explained that the company had made significant investments to expand its international footprint and scale its production. If the company can boost output in China, Europe, and the United States, and the demand is there, the scales could tip — especially in light of strong growth in international markets last year.
Beyond Meat is playing the long game, and as an investor, it’s likely in your best interest to do the same. Wait for production capacity to ramp internationally to see if it can ignite sales growth again.
What’s Next for Beyond Meat?
Management anticipates increasing demand as it launches new products. Beyond Meat’s Beyond Burger put the company on the map, but now it’s diversifying into the plant-based chicken segment. The Beyond Chicken Tender will be launched in 8,000 new grocery and big-box retailers.
Although the long-term outlook for plant-based meat is encouraging, investors should be aware of some key competitors in the market, including Impossible Foods, which is not yet a publicly traded company. Other big players include Cargill (not publicly traded) and Hormel Foods (NASDAQ: HRL).
Impossible Foods has already undercut prices to gain market share, slashing them by 20%. However, the greatest concern may not be company specific as much as it is industry specific.
Market saturation is a valid concern that could hurt BYND stock this year and beyond. Some analysts are concerned that there isn’t enough growing interest in plant-based products. Based on the recent downward decline across this niche market, there may not be enough demand for multiple companies to take market share and thrive.
Bottom line: At the current price, Beyond Meat is sitting close to fair value but it’s unlikely to resume an uptrend until management can prove its thesis to be correct: specifically that new products, increased production capabilities and international growth will ignite sales growth again.