If you’ve followed my work over the past few months, you know I haven’t been the biggest fan of faux-meat producer Beyond Meat (NASDAQ:BYND). While the concept is interesting, BYND stock strikes me as a fad investment, rather than a long-term winner.
In the past, we’ve seen plenty of companies, perhaps most notably National Beverage (NASDAQ:FIZZ), run dramatically higher, only to be taken down by the whims of shifting consumer behaviors. So despite the impact of the novel coronavirus, I’m still bearish on BYND stock.
Conspicuously, shares plummeted from late February into the second half of March. It wasn’t until the pandemic crippled the broader food supply chain that Beyond Meat and its rivals became interesting. Prior to this mess, alternative meat products found themselves priced higher than their real counterparts, disincentivizing sales.
However, I must admit that the present situation is a bonanza for BYND stock. The supply chain issue has become so bad that farmers had to gas or shoot tens of thousands of animals. Adding insult to injury, millions of Americans — including the children of suddenly impoverished families — are going hungry.
In fact, this was one of the primary narratives for Beyond Meat even before the coronavirus pandemic. According to plant-based advocates, the traditional meat industry’s supply chain is unnecessarily cruel and environmentally unfriendly. While some may disagree with those statements, the outbreak of Covid-19 has become a flashpoint for the industry, as the cramped conditions in which meat-packing employees work are a hotbed for viral transmission.
In other words, real meat is really a net loss for everyone. Moreover, as food prices jumped to accommodate the new normal, real meat and fake meat suddenly found themselves on an equal footing. This and other factors have accelerated the case for BYND stock. But will this dynamic still be relevant when things stabilize?
BYND Stock Is Enjoying a Temporary Tailwind
Though I recognize that the faux meat industry is having its day in the sun, that’s also my problem here. Essentially, we’re talking about a moment, not a fundamental shift in consumer behavior.
You might argue that millennials and younger generations are more environmentally aware than prior generations. Furthermore, they place a greater emphasis on experiences rather than material goods. One of those experiences involves good, healthy eating, and that’s what Beyond Meat offers.
But is it really? First, we must look at the common-sense argument: meat is meat and plants are plants. Thus, when you take plants and turn them into an accurate meat substitute, something has to give. Typically, that “something” is loads of chemicals and highly technical processing to make a product that replicates real meat.
Health experts are cautious about endorsing faux meat as a healthy alternative to real meat; we just don’t know enough about their long-term consequences. I appreciate the words of Joan Salge Blake, Sargent College of Health & Rehabilitation Sciences clinical professor of nutrition, who stated, “Don’t just assume the new options are healthier than the cow.”
Additionally, younger consumers are hip to what’s actually healthy, eschewing marketing glitz for the real deal. A great example of this is the beverage preference of Gen Z, many of whom are in college now. According to Fooddive.com, bottled water has been marching toward dethroning soda as the number-one beverage category in the U.S.
Of course, water is the healthiest choice of all beverages — it’s just water. Further investigation reveals that Gen Z cares about the chemicals that they put into their bodies. Again, this doesn’t help the long-term case for the meatless meat industry, which heavily relies on chemicals.
Technical Posture Isn’t Supportive
Lastly, while the year-to-date performance of BYND stock is very impressive, shares have been all over the map. I think it’s telling that Beyond Meat didn’t look too hot until a once-in-a-blue-moon pandemic disproportionately impacted its mainstream competitors.
But then, you’ve got to ask yourself: if Covid-19 didn’t disrupt the food supply chain, would we still be talking about fake meat?
From my perspective, it appears that consumers are trying protein alternatives because they happen to be cost-effective. When that is no longer the case, I strongly believe that consumers will revert back to meat consumption. After all, old habits die hard.
I also think it’s peculiar that BYND has so far failed to break the $150 resistance level that’s been in play since the first time shares turned volatile. That was back in October 2019.
In all likelihood, the markets are giving you an early warning. Although Beyond has suddenly become all the rage, don’t expect this bullishness to continue indefinitely.
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.