What’s my take on Beyond Meat (NASDAQ:BYND) stock? One word — fad!
Sure, plant-based meat is trending, especially among millennials. But I don’t consider it a “megatrend.” Why? Simply put, this “flash-in-the-pan” craze has a short shelf life.
This meat alternative is having its 15 minutes of fame. Yet, once those riding the wave realize this product is far from healthy, it’ll wind up in the dustbin of food concepts that came and went.
And even if plant-based meat becomes a major component of the American diet, what’s to say Beyond Meat will command dominant market share? Lack of economic moat is also why I don’t see good reason to chase this “story stock.” The large food companies could easily come in and take the lion’s share.
Yes, the company’s products may taste more similar to meat than other substitutes. But I’m banking most customers won’t jump ship from the real thing. In short, I don’t see this company living up to ambitious growth projections. Also, with the product’s questionable health merits, I can see its existing customer base tiring of it as well. These products don’t belong in your shopping cart, and BYND stock doesn’t belong in your portfolio.
BYND Stock is No Bet on Healthy Eating
Some adopters of Beyond Meat support the concept for environmental reasons. But a lot of their customers are in for the supposed health benefits. The company doesn’t come out there and say it, but the implication is that plant-based meat gives you the flavor of red meat, without the associated health risks.
Yet, it’s not as if Beyond Meat is some sort of all-natural “whole-food” product. In my opinion, it’s no different than the same processed foods nutritionists and other experts are quick to decry. High in sodium and other preservatives, this is more “Frankenfood” than health food. These products are also high in fat, leading to skepticism whether it’s healthier than old-school beef and pork.
You could argue that the perception of “healthy” is more important than actual health benefits. But, we’ve seen “healthy” processed food products come and go once consumers realize you can’t have it both ways. Remember those low-fat potato chips from the ’90s? How about those low-fat but high-sugar snack treats? Attempts to have the taste without the health consequences have proven time and time again to be fads that come and go like fashion trends.
And that’s the case with Beyond Meat. Sure, millions may be buying it now, just to try it out. They’ll grill some up, taste it, say “it’s okay,” and never try it again. But what about true believers in the product? I think once they’re more cognizant of the product’s high amounts of fat, sodium, and other chemicals, they’ll jump ship as well.
Even after big declines since earlier this year, BYND stock still trades as if this niche product will gain critical mass. But given this product’s long-shot odds of multi-billion dollar success, there’s plenty of downside left on the table.
The Numbers Don’t Add Up
Looking beyond the debatable “health benefits” of Beyond Meat, there’s another factor at play that makes this a stock to avoid. What am I talking about? Risk from competition, and how that affects gross margins.
In one corner, you have Beyond Meat, a startup trying to gain share in a multi-billion dollar food industry. In the other corner, you have Cargill, Kellogg (NYSE:K), Tyson Foods (NYSE:TSN), and others all throwing their hat in the ring. Who do you think has the edge?
Yes, I agree sometimes the big dogs lose their lunch to lean-and-mean upstarts. But, considering Beyond Meat’s struggles with raising their gross margins, along with other plant-based meat companies like Impossible Foods slashing prices, it seems far-fetched the company can quickly capture dominant market share.
Yet, you may ask, what about Beyond Meat’s deals with fast food chains? You have McDonald’s (NYSE:MCD), Dunkin Brands (NASDAQ:DNKN), and other chains testing products using the company’s plant-based alternative. Granted, it’s good for brand awareness. But it’s still a long-shot whether these plant-based products continue at all, much less these chains using Beyond Meat-branded products instead of generic versions.
Beyond Meat Stock Has Reached Its “Sell By” Date
With dubious health claims and high competition, it just doesn’t add up for Beyond Meat. Wall Street has gotten the message, and is falling out of love with this “story stock.” That’s why shares have tumbled from above $125 per share earlier this year to below $70 per share today.
In short, BYND stock has reached its sell-by date. With more downside on the table, consider shares a sell.
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.