Plant-based food company Beyond Meat (NASDAQ:BYND) started a meat-alternatives revolution upon its establishment in 2009. And when BYND stock went public in May of 2019 at $25 per share, the trading community went absolutely bananas.
Click to Enlarge
In February of this year, I tried to warn investors because the BYND stock price was high and consumers’ tastes are fickle. I asked the pointed question, “Will the plant-based faux-meat market remain in hypergrowth mode, or is it just the flavor of the month?”
I honestly had no idea that the novel coronavirus was about to devastate the global economy and the stock market. Therefore, I can’t take credit for warning folks about BYND stock immediately before the share price plunged.
Today, the BYND share price is high again and it’s time to re-assess the company’s prospects for future growth. The coronavirus remains a major concern, of course, but there’s another issue that could prevent BYND stock from maintaining its bullish trajectory.
A Closer Look at BYND Stock
As I alluded to earlier, the onset of the coronavirus put downward pressure on the BYND stock price. Thus, on March 18, BYND touched its 52-week low of $48.18.
That was a more reasonable valuation for BYND stock, but it wouldn’t stay below $50 for long. Over the summer, BYND shares exceeded $150 and in early October, the stock price nearly reached $200.
A pullback followed, bringing the BYND stock price back to the $150 area in early November. I’m all for buying the dips in great stocks, but $150 still seems a bit pricey in my humble opinion.
As evidence of this, note that the trailing 12-month earnings per share for BYND stock is negative eight cents. That’s not horrendous, but it’s still below zero. Value-focused investors might feel better about BYND if and when the earnings figure turns positive at some point in the future.
Being First Doesn’t Always Help
Beyond Meat wasn’t necessarily the first company to attempt to popularize plant-based meat alternatives. However, the company did succeed in mainstreaming meatless meats and that’s certainly commendable.
Yet, the advantage of being first doesn’t typically last forever. A chief rival, Impossible Foods, came along in 2011 and Beyond Meat’s niche dominance came under siege.
Finicky consumers might find subtle differences between the plant-based offerings of Beyond Meat and Impossible Foods. Yet, I suspect that most food shoppers won’t differentiate between the two. InvestorPlace contributor Josh Enomoto elaborates on this point:
“If Impossible Foods’ branding and marketing initiatives are successful, the main criticism against it (the usage of GMOs) won’t matter much to the bottom line. At the end of the day, there’s very little that separates the two plant-based meat competitors.”
A Competitive Landscape
Enomoto also hinted that Impossible Foods’ alternative meat products might be “superior in the taste department.”
If that’s the case (and I understand that taste is subjective), then consumers might prefer Impossible Foods to Beyond Meat even though the latter company was the pioneer.
Besides, Impossible Foods isn’t the only serious rival to Beyond Meat anymore. For example, Kroger (NYSE:KR) offers plant-based meat products under the Simple Truth brand.
Other up-and-coming competitors include Planterra Foods’ Ozo brand, plant-based egg maker Just Egg and meatless meat/seafood producer Prime Roots.
With all of this undoubtedly in mind, UBS analysts conclude that “increased competition from branded peers and private label (especially in a recession) pose a threat to Beyond Meat.”
I tend to concur with this assessment. Therefore, I would caution share-price chasers to wait for BYND stock to pull back before taking a position.
The Bottom Line
Competition is healthy, but it’s not going to help BYND stock holders.
As Beyond Meat’s pioneer status becomes less important and the field gets more crowded, traders are advised to take a cautionary stance with BYND stock.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
