Beyond Meat (NASDAQ:BYND) has shown signs that it wants to move lower, but so far, BYND stock has held up well.
After the company reported earnings in early May, shares burst higher and have been trading sideways since. The rallies have fizzled on each push higher, but the dips have been short-lived as well. It seems as though neither side can gain much traction.
In the short term though, it doesn’t matter. I want to take a pass on Beyond Meat as the stock looks to be somewhat of a fad. While meatless products offer a great alternative to those who do not eat meat, consumers will eventually catch on that these products are loaded with plenty of ingredients that they may not care to put in their bodies.
While Beyond Meat continues to boast solid growth, it doesn’t seem like an appetizing stock.
Beyond the Burger
Those who follow along with my work know that I don’t back away from high-valuation stocks. Names like Tesla (NASDAQ:TSLA), Shopify (NASDAQ:SHOP) and Twilio (NYSE:TWLO) aren’t exactly on the list of top stocks for Warren Buffett. However, I like these names as they center on secular themes with high-growth trends.
I don’t view Beyond Meat in the same way.
Admittedly, growth forecasts are strong, with analysts expecting back-to-back years of revenue growth near 53%. If that plays out, Beyond Meat will generate just over $700 million in sales next year.
Still, that leaves shares trading at more than 18 times this year’s revenue estimates and almost 12 times 2021 revenue. Only when it goes out to 2022 estimates does the price-to-revenue figure drop into the single digits (at 8.1 times sales).
Further, Beyond Meat is not profitable. Admittedly, the company is not saddled with massive losses, but it’s barely on the right side of breakeven. After losing 29 cents per share in 2019, consensus expectations call for profit of just 13 cents per share.
With such rapid revenue growth, it would be more attractive if the company could pad its bottom line more aggressively — for instance, like The Trade Desk (NASDAQ:TTD).
Overall, the numbers aren’t bad, but they don’t get me that excited.
Partnerships and Competition
I also have to hand it to the company for continuing to secure solid partnerships.
JPMorgan analysts recently argued that Beyond Meat could expand its partnership with McDonald’s (NYSE:MCD). However, they also said they’re taking a wait-and-see approach, as the recent test run in Canada was concluded rather than expanded.
Still, Beyond Meat is working with Starbucks (NASDAQ:SBUX) in China, as well as with Dunkin Brands (NASDAQ:DNKN). It also plans to expand its partnership with KFC, while beginning a partnership with Pizza Hut. Both partnerships are in China.
At the same time, Beyond Meat faces increasing competition. Investors are well aware of Impossible Foods — you know, the Impossible Burger — but many big-name players are getting into the space as well.
If this trend is more than a fad and really starts to take off, Beyond will have to compete with companies that have deep pockets, plenty of shelf space in retail and strong supply chains.
The list of companies getting into meatless products is long and includes: Tyson Foods (NYSE:TSN), Kellogg (NYSE:K), Kroger (NYSE:KR), Nestle, ConAgra Foods (NYSE:CAG) and Hormel Foods (NYSE:HRL), among others.
The Bottom Line on BYND Stock
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I don’t expect BYND stock to crash and burn, becoming worthless in a few years. But it lacks the same attraction that other secular growth plays show, with less concern over potential competitive pressures.
In early May, we saw Beyond shares jump over the 200-day moving average in response to earnings. That rally took shares above $130 resistance, but since then, higher lows have formed (blue line).
Will BYND stock breakout and clear $150? Perhaps. It’s possible. But it could also break down, just like it did a week ago. If shares take out the $116 mark, a test of the 200-day moving average could be in play.
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.
