Beyond Meat (NASDAQ:BYND) continues its decline. The El Segundo, California-based food company has seen the initial public offering hype that took it to stratospheric highs change direction.
Now, the BYND stock price continues trending downward amid doubts about both the product and Beyond Meat stock itself. With the number of uncertainties continuing to build, investors should consider avoiding not only BYND stock but also the industry itself.
Is Plant-Based Meat the Answer?
Listen, I understand why many want plant-based meat, and by extension, Beyond Meat stock to prosper. The National Institutes of Health has long associated red meat consumption with increased mortality, heart disease, cancer, and other health problems. In years past, many responded to these worries by removing meat from their diets.
Yet, despite these concerns, 84% of vegetarians eventually return to eating meat, as noted in a survey by Faunalytics (formerly the Humane Research Council) and reported in Psychology Today. In a world where few chefs have mastered the art of the satisfying vegetarian meal, a product such as Beyond Meat’s meat substitute has obvious appeal.
My colleague Josh Enomoto took an interesting approach, going into the health concerns surrounding processed foods. As a financial writer, I typically feel more comfortable sticking to criticisms of Beyond Meat stock rather than the product.
However, if his concerns prove correct, such outcomes could obviously devastate BYND stock. Moreover, in our current investment world, the likes of Kraft Heinz (NYSE:KHC) and General Mills (NYSE:GIS) have seen their stocks suffer amid health concerns about processed food. From that standpoint, the surge higher in Beyond Meat stock following its IPO defied logic.
Furthermore, BYND stock has begun to experience health concerns of its own. Stock-buying euphoria took it as high as $239.71 per share during the summer. However, seeing the stock price, a secondary stock offering announced in its second-quarter earnings in late July ended the bull run for BYND.
Moreover, John Macke, the CEO of Amazon’s (NASDAQ:AMZN) Whole Foods, questioned the health benefits of the product. Following its third-quarter earnings, discounting and concerns over an expiring IPO lockup led to another enormous drop. Since that time, it has steadily declined and now trades below $80 per share.
BYND Stock Has Health Concerns of Its Own
It was a bubble at almost $240 per share. At about $80 per share, it remains a bubble. Beyond Meat stock trades at a forward price-earnings (PE) ratio of just over 200. It also sells for almost 21-times sales. However, this is worse as the bubble continues to head in the wrong direction for traders.
InvestorPlace contributor Ian Bezek also points out another huge problem with Beyond Meat stock — no competitive moat. For now, BYND remains the only pure-play in the plant-based meat trend. However, with the likes of Kellogg (NYSE:K) and Hormel Foods (NYSE:HRL) jumping on this trend, both consumers and investors have alternatives.
Still, in the end, traders have few good vehicles for investing in this industry. They can pick Beyond Meat stock at bubble-like valuations. Or, they can choose an established food stock that has generated little excitement and significant skepticism in recent years. Given this reality, investors should not only avoid BYND but perhaps the rest of this industry as well.
Final Thoughts on Beyond Meat Stock
Beyond Meat stock keeps giving investors more reasons to sell. For a short time, BYND prospered on the prospects of a viable, plant-based alternative to meat. However, many have begun to question the health benefits of its product. Moreover, BYND stock still appears overvalued, especially since they cannot stop more established food companies from competing.
Given the high valuation and falling hype, both Beyond Meat stock and plant-based meat in general has become an investment trend traders need to avoid.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can follow Will on Twitter at @HealyWriting.