There’s no denying that fake-meat burger maker Beyond Meat (NASDAQ:BYND) is having a moment in the sun. BYND stock was up 8% in premarket trading after delivering better-than-expected Q1 results on Tuesday.
Ahead of the novel coronavirus pandemic, the faux-meat producer was helped by consumers’ shift toward plant-based eating and saw it’s infamous “bleeding” veggie burgers picked up by big-name fast-food chains.
Now that the traditional meat industry has seen severe supply chain interruptions due to the coronavirus, Beyond Meat is seeing even greater tailwinds.
But investors are overzealous about BYND stock’s potential to keep rising. Not only are the coronavirus tailwinds temporary, but there’s also some doubt as to whether they really exist. Plus, it seems unlikely that switching to plant-based diets is a lasting trend. Even if it was, processed burger patties laden with unpronounceable ingredients don’t exactly align with the health-conscious nature of veganism.
BYND Stock’s Meteoric Rise
There’s no doubt that investors who picked up BYND stock in March when the market tanked are doing well. The stock has delivered nearly 50% returns since then.
Some of that enthusiasm is deserved. The firm’s Q1 results were great. Revenue was up 141% and Beyond Meat’s net income rose to $1.8 million from a loss of $6.6 million a year ago. The firm said it plans to use the meatpackers’ supply chain issues to grab market share in the weeks ahead by discounting its products to make them more readily available.
There’s no question that meatpackers’ struggles will help line Beyond Meat’s pockets, but it’s important to consider just how much. First of all, BYND isn’t the only company operating in the vegan meat space. There are small-time rivals like Impossible Burger, which offers a nearly identical “bleeding” burger, as well as traditional meat sellers like Tyson Foods (NYSE:TSN) that have come out with their own vegan alternatives.
Notably, Beyond Meat doesn’t really offer anything unique that would cause customers to keep coming back. In fact, Impossible Foods’ burger patties have been touted for tasting closer to real beef than Beyond burgers. There’s no real moat there and that’s troubling from an investment standpoint. Without something that sets the company apart from its competitors, Beyond is another fake meat company in a sea of fake meat products.
Health Concerns
Then there’s the fact that Beyond Burgers are heavily processed and stuffed full of unpronounceable ingredients. While Beyond Burgers are notably non-GMO, the burger patty itself isn’t exactly healthy. That’s problematic for BYND stock’s long-term growth story.
It significantly reduces the firm’s value proposition for those who are trying to cut down on meat products to be healthier. If a burger is your comfort food of choice, replacing it with an equally unhealthy meatless product that doesn’t taste quite the same isn’t that appealing. Instead, you can envision this group of omnivores trying to cut down on meat replacing meat-based meals with plant-based options that incorporate whole foods. Why swap unhealthy for unhealthy? It doesn’t make much sense.
This so-called shift toward plant-based eating may be coming, but for those who are simply eating less meat, a heavily processed Beyond Burger doesn’t really fit in.
Coronavirus Headwinds Will Die Out
A lot of people are pointing to the fact that more and more consumers are trying Beyond Burgers in the absence of real beef patties amid the coronavirus pandemic. That should create a tailwind over the next few weeks, but once meat production comes back online it will likely evaporate quickly.
That’s because real beef is cheaper than fake beef. It also tastes better than fake beef — to meat-eaters, that is.
That means except for strict vegans who are unconcerned about processed foods, Beyond Burgers are a luxury product that doesn’t fill any particular gap in their diet. There are many, far cheaper, ways to incorporate plant-based eating into your diet. A sub-par replacement for burgers that’s also more expensive than burgers is unlikely to retain its wide-spread popularity for long.
The Bottom Line on Beyond Stock
The hype around BYND stock right now is little more than that — hype. At some point, investors will start to realize that Beyond isn’t offering anything to differentiate itself from competitors. Even if it was, the popularity of meatless burgers is likely just a passing fad that will end badly for those who’ve jumped into BYND stock with both feet.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.
