Beyond Meat has been on a rollercoaster ride since its IPO last year. Is now the time to invest?
It’s been a wild ride since plant-based meat company Beyond Meat (NASDAQ: BYND) went public in May 2019. Having IPO’d at $25 per share, less than two months later the stock had surged more than 700%, the point that trading was briefly halted due to volatility. As of April 28, the meatless stock is up nearly 20% in 2020.
What happened to Beyond’s stock this week?
Beyond Meat saw its stock fall more than 8% on Tuesday as analysts downgraded to sell from neutral. The reason for this dip though comes as analysts fear drawback within its exposure to the foodservice industry, which accounts for 51% of the company’s revenue. This dip takes place off the back of a month-long rally which has seen shares jump 69%. Much of this rise came following an announcement from Starbucks (NASDAQ: SBUX) that it would launch Beyond products in China, where its stores are just opening back up.
Many independent businesses may not survive the outbreak, and national chains may not see sales bounce back as quickly as some may think due to the skyrocketing unemployment rate.
How does BYND compare with other 2019 IPOs?
As of Tuesday, 28 April, Beyond’s stock is up nearly 300% since its IPO, a very good performance in a year that saw the likes of Slack (NYSE: WORK), Uber (NYSE: UBER), and Lyft (NASDAQ: LYFT) all underperform. Beyond stock was actually among the top-performing IPOs of 2019, which included the likes of Karuna Therapeutics (NASDAQ: KRTX) or NextCure (NASDAQ: NXTC) — which rose 341% and 276% respectively.
None of these companies mentioned above have experienced close to the same fluctuations as Beyond though.
What is causing this volatility?
There have been a number of factors in Beyond’s stock performance since the start of the year, ranging from analyst valuations to celebrity endorsements and threats of competition.
Beyond Meat was already on a tear back in January when it received a surprise endorsement from two unlikely celebrities: Snoop Dogg and Kim Kardashian. Then the coronavirus pandemic hit, and the stock has been bouncing up and down since, though faring reasonably well.
Its continued partnership with Dunkin Brands (NASDAQ: DNKN) has proven a smart bit of business, and in March it joined with Dunkin’ rival Starbucks.
Aside from this, Beyond has also ramped up its partnerships with McDonald’s (NYSE: MCD), Subway, Del Taco (NASDAQ: TACO), Carl’s Jr, and A&W Restaurants. The McDonald’s deal, in particular, has been quite successful, with Beyond stating that talks to expand are going ‘very well’. The aim for Beyond will be to secure a deal for McDonald’s 14,000 U.S. locations. However, the recent pandemic has put the restaurant industry’s future in some doubt.
Beyond, however, has embraced its philanthropic side, and is in the midst of a program to deliver 1 million Beyond Burgers to frontline staff and the homeless during this crisis.
Threats to Beyond Meat
The biggest threat to Beyond Meat right now is still the stiff competition it faces from some of the biggest companies in the U.S: Tyson Foods (NYSE: TSN), Nestle (OTC: NSRGY) and Kellogg (NYSE: K). Then there are other relatively young players like Beyond, such as Impossible Foods, and Chinese competitor Zhenmeat.
Another issue that has plagued Beyond Meat has been its inability to ‘meat’ demand — see what I did there? The chain had serious logistical issues in 2017 and 2018, but CEO Ethan Brown has been confident that the company can meet the required demands to become a major player in meat alternatives. There has been much speculation that the issues would return, but this does not seem to have been the case — yet.
What is in store for Beyond Meat?
With so many options in the general meat alternative pipeline, it is likely that Beyond Meat will lose some of its pricing power down the line. However, Beyond’s February earnings gave some cause for optimism: Net sales rose 212% to $98.5 million, topping expectations of $79.5 million, while also reporting a fiscal fourth-quarter net loss of $452,000, or 1 cent per share, narrowing its loss of $7.5 million, or $1.10 per share, a year earlier.
As well as this, plant-based penetration in the global meat market will steadily climb toward 10% over the next decade according to analysts, and possibly higher. 2020 could be an important year for the company, which has several important deals such as the McDonald’s endeavor mentioned above. Other notable catalysts for this year include a partnership with the L.A. Lakers basketball team — the most popular NBA franchise in America according to some
With some good luck, clever planning, and continued backing from investors, Beyond could be in a prime position to take advantage of the meatless revolution taking place across Western society. But there’s still a long way to go yet.
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