The volatility in Beyond Meat (NASDAQ:BYND) stock seems to have no end, with multiple reasons for bearishness and bullishness constantly arising. This week has been no different. On the one hand, Beyond Meat stock got hit with news that Restaurant Brands International’s (NYSE:QSR) Tim Hortons dropped the company’s meatless offerings from its menu.
But on the other hand, Yum! Brands’ (NYSE:YUM) KFC announced that it will use Beyond Meat’s meatless chicken at more of its restaurants in a trial run.
Add to that the fact that a seemingly low-profile case against Beyond Meat has gained traction and now threatens its current managerial lineup, and it’s no wonder the stock has been ping-ponging all around lately.
And all of this has happened in less than a week.
Is Beyond Meat Stock More Flash Than Substance?
This news feeds into the question of whether the stock is a worthy investment right now. As I’ve mentioned in the past, there are plenty of reasons to have faith in the meatless meat movement more broadly. However, whether Beyond Meat in particular will continue its role at the top is still unclear.
Yes, the company has a brand that’s starting to gain household recognition. But the same could be said about some of its major competitors like Impossible Foods and its “Impossible Burger.” Consider that the alternative-meat burger is becoming a staple at popular fast food chains like Burger King.
It’s difficult to bet the house on Beyond Meat right now given that many of its potential deals, such as those with McDonald’s (NYSE:MCD) and now, more recently, KFC, are just trials. Although Tim Hortons doesn’t state that it will never use Beyond Meat’s products again, the trial run did not lead to a definitive answer for the company. And while there’s plenty of reason to be optimistic about a potential deal with KFC, again, at the end of the day, it’s just a trial.
At least for now.
According to Business Insider, Beyond Meat’s chicken had a “wildly successful” run in its tests in Atlanta. The company is extending its tests to KFC locations in North Carolina, Tennessee and Kentucky. But this seemingly positive news isn’t enough to overcome other threats that loom over Beyond Meat stock right now.
More Problems for Beyond Meat
The court case with Don Lee Farms is taking a toll, keeping the stock down more than 1.5% in early morning trading today.
The allegations in the case are serious, with Don Lee Farms — a producer of meatless meat — accusing Beyond Meat of stealing its trade secrets after it parted ways with the company. While the case has yet to reach a definitive conclusion, a judge ruled that “Don Lee ‘proved the probable validity of its claim’.” The outcome of this trial could develop an ugly upstart tinge to the origin narrative for Beyond Meat.
Another part of the allegations is that Beyond Meat is much “more nonchalant about food safety.” With food safety issues sinking behemoths like Chipotle (NYSE:CMG) for years, such threats are considerable. This is especially true if lax practices in food safety from the company lead to sickness or death.
Adding fuel to the flames, Ken Goldman, an analyst at J.P. Morgan, issued a downgrade on Beyond Meat stock yesterday. The reasoning for this isn’t related to the court case (the ramifications for which require an additional assessment), but the analyst doesn’t see the stock as having much more room for upside. As such, J.P. Morgan downgraded it from “buy” to “hold.”
The Bottom Line
In light of these recent events, I’ll have to reiterate my stance to remain cautious about Beyond Meat stock. Sure, the expanded trials with KFC hold promise. But these other issues, such as the uneventful end of the Tim Hortons trial and the growing strength of the Don Farms case, make me worry.
And the concern is even more legitimate after considering the rising strength of its competition. As InvestorPlace.com Contributor Patrick Sanders points out, “Like any startup, the company’s valuations are out of whack, but Impossible Foods seems to be positioned better in the market right now. This is particularly true given its well-branded partnership with Burger King.”
Beyond Meat stock is still something I’d avoid right now. That is until the company — at a minimum — seems more likely to truly nab a new big-time deal with a major fast food restaurant.
Robert Waldo has been a web editor for InvestorPlace since 2016. As of this writing, he did not hold a position in any of the aforementioned securities.