This year, the IPO market has delivered many robust gains for investors. Most of these have been in the tech sector, such as with cloud companies like Crowdstrike Holdings (NASDAQ:CRWD), Zoom Video Communications (NASDAQ:ZM) and Pagerduty (NYSE:PD). And then there’s Beyond Meat (NASDAQ:BYND).
BYND stock, which is a top player in the plant-based meat category, has been a big-time surprise. The company launched its IPO in early May and the shares spiked 163%. But this was just a warm up. The Beyond Meat stock price has since gone on to gain 711%. In fact, yesterday the stock added $19.94 to $222.86 (it was at about $170 at the start of this week).
All this is indicating that Wall Street is expecting blow-out earnings when the company announces its results for the second quarter next Monday. Here’s a look at the forecast: The consensus is calling for revenues to come in at $52.7 million, which would be a 202% increase (during Q1, the growth rate was 215%). The company is also expecting to post a loss of 8 cents a share, which is fairly modest.
Interestingly enough, it looks like the main concern for Wall Street regarding BYND stock is that there are shortages. The demand is intense.
Yet according to CEO Ethan Brown, he has been taking actions to deal with the problem. In an interview with the Wall Street Journal, he said: “We were surprised in the interest consumers were showing in our products, and that it turned on very quickly.”
Now during the latest quarter, there has been lots of news that has helped to fuel Beyond Meat stock. Here’s a look:
- Dunkin Brands Group (NASDAQ:DNKN) indicated that its using Beyond Meat sausage for a breakfast sandwich. It will first be available in locations in Manhattan and then will go across the rest of the U.S. Keep in mind that BYND has distribution deals with other major food services companies like Restaurant Brands International (NYSE:QSR), Del Taco Restaurants (NASDAQ:TACO), Carl’s Jr. and TGI Friday’s.
- Beyond Meat launched the next version of its Beyond Burger, which melts like real beef — making the texture juicier — and has a more neutral flavor and aroma profile. The new offering is also without GMOs, soy or gluten and is OK Kosher Certified.
- According to a report in CNBC.com, Beyond Meat is creating a meatless version of bacon. Although, there is no launch date set. Bacon is on 68.1% of fast-food menus, based on research from Datassential.
- Beyond Meat entered a partnership with Blue Apron (NYSE:APRN), a meal kit service. On the news, APRN stock soared by 67%!
Bottom Line On Beyond Meat Stock
At the time of the IPO, I wrote a bullish post for InvestorPlace.com about Beyond Meat stock. I thought the strategy was spot-on — that is, by focusing on the mainstream consumer, not vegans or vegetarians (who account for a mere 5% of the U.S. population). The fact is that there is much interest in healthier meat substitutes, so long as the taste and texture are similar.
But the problem is that the valuation on Beyond Meat stock is way too rich. Note that the market cap is $13.4 billion and the shares trade at a staggering 116 times sales. For the most part, Beyond Meat stock is factoring in hefty growth for many years to come. And this seems unrealistic as there is competition from other startups as well as long-time food producers.
The run-up in Beyond Meat stock looks like what happened with the cannabis trade during the past year. There was initially a major surge because of legalization in Canada. But as growth decelerated, the stocks came under lots of pressure.
Granted, when it comes to Beyond Meat stock, the momentum could continue. But with the valuation already at lofty levels, a small disappointment could mean a sizable pullback.
Tom Taulli is the author of the upcoming book, Artificial Intelligence Basics: A Non-Technical Introduction. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.