Beyond Meat has been one of the most hyped stocks on the market so far this year, but why exactly does the stock keep jumping up and down?
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. On Tuesday this week, trading was briefly halted for a second time due to similar volatility.
How does BYND compare with other IPOs?
As of Wednesday, 15th January, Beyond’s stock was up more than 300% on 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 when it received a surprise endorsement from two unlikely celebrities: Snoop Dogg and Kim Kardashian. During a social media event, Kim Kardashian gave a tour of her and husband Kanye West’s home and some more eagle-eyed viewers noticed a stockpile of Beyond products in the couples’ family freezer. The unconscious product placement sent shares soaring 7%.
Rapper Snoop Dogg contributed to Beyond’s rally by announcing a partnership with Dunkin Brands (NASDAQ: DNKN) and endorsing the coffee chains ‘Beyond D-O-Double G sandwich’. The Snoop-approved sandwich has been made available nationwide. The media stunt caused BYND stock to pop more than 10% on the day.
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 fast-food giant will expand the test of its Beyond burger to 52 outlets in Canada over a 3 month period, starting this week. Though the deal is not currently financially lucrative, the potential is massive. The aim for Beyond will be to secure a deal for McDonald’s 14,000 U.S. locations.
Then, on Tuesday, analysts began lowering their ratings on Beyond, stating that the stock was fairly valued at just over $100 per share after the company’s stock had jumped more than 50% in two weeks. Then trading was briefly halted. The following day, Wednesday 16th, Beyond’s stock dropped 8%.
Threats to Beyond Meat
The biggest threat to Beyond Meat right now is 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, which just this week began a major funding push.
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 earnings give some cause for optimism, reporting net income of $4.1 million in its October earnings report and a 250% surge in sales, compared to a loss in the same period a year before.
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.
For more articles about Beyond Meat, you can check out the following:
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