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Bear Of The Day: Beyond Meat (BYND)

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Daniel Laboe
·3 min read
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Beyond Meat (BYND) has been a meatless miracle with shares having run far past this 'trendy' stock's true risk-weighted value. Sell-side analysts are beginning to rein in their expectations as the market euphoria surrounding this cliché new plant-based protein alternative has pushed BYND into a Zacks Rank #5 (Strong Sell).

Why I Don't Like The Stock 

First and foremost, this small alt-protein meat enterprise will not just waltz into the consumer-packaged-goods (CPG) industry and completely monopolize this niche space. The big meat industry players like Tyson Foods (TSN), JBS Holdings, Cargill Meat, and Perdue are all making moves in the plant-based meat segment. These food giants proven distribution and supply chain operations, along with longstanding corporate relationships, will be leveraged to outplay this start-up.

Granted, Beyond Meat has secured some lucrative partnerships with global fast-food giants like McDonald's (MCD) and Yum! Brands (YUM) that have justified some of BYND's upward move. However, I still believe that BYND is overextended.

I am worried that this a fad among younger consumers (which is where the primary demand is originating), and the fact that this new plant-based meat isn't actually healthier than real meat may slow its roll. Beyond Meat's products are all highly processed, and some nutritionists are saying that this faux-meat may actually be less healthy than traditional options.

BYND has appreciated over 450% from its IPO in May of 2019 (200% from its first publicly traded price) but has traded sideways for more than 10 months. The company is trading at a double-digit P/S multiple. Its deeper slips into a bottom-line and cash-flow deficit are concerning for a company with such an uncertain future.

The stock currently has 6 sell ratings and only 2 buy ratings, with its current share price trading at a 20% premium to its average target price.

Final Thoughts

I'm not going to be putting on a position in BYND one way or the other because of the stock's inherent volatility. I don't believe in this 'progressive' business model's story and think there are too many risks at its current valuations.

Even if plant-based meat is not just a fad but a sustained and growing business, I think Beyond Meat will be hard-pressed to compete with the capital and economies of scale of the meat industry's longstanding leaders. To put things into perspective, Tyson Foods is estimated to generate 72 times as much revenue as Beyond Meat in 2021 and robust profitability that dwarfs even BYND's sales (0 expenses taken out).

TSN is less than 3 times the market value of BYND in an industry it has operated in for decades. The risk/reward ratio in BYND shares is much too high for me to consider the stock as investable.

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