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Beyond Meat (BYND - Free Report) is a meatless miracle with a valuation that has run far past this 'trendy' stock's intrinsic value. Sell-side analysts are beginning to rein in their expectations as the market euphoria surrounding this cliché new plant-based protein alternative dissipates, pushing BYND into a Zacks Rank #5 (Strong Sell).
BYND remains the one stock that stands out to me as overvalued on the Zacks Strong Sell list. I mean, you don't see many public equities that are 44% off their recent highs that still have 2 sell ratings, considering that analysts are not very likely to recommend something as a sell unless fundamentals are way out of whack with the share price.
I have been apprehensive about this glorified consumer packaged goods (CPG) enterprise since it hit the public exchanges in May 2019. The company was and remains unprofitable and faces massive competition that could quickly put this meatless fairytale out of business with leading players in the sector having far superior operational maturity.
Each quarterly report that Beyond Meat releases makes me further question its shareholders' rationality, who are keeping this increasingly profitless company at a double-digit forward P/S valuation.
In its Q2 report Thursday evening, BYND marginally exceeded revenue estimates but came in below Zacks Consensus Estimates for the 5th consecutive quarter. The company is getting further and further away from profitability every quarter, and despite experiencing sales growth abroad, its domestic performance has been abysmal.
Beyond Meat has seen massive topline deceleration over the past 4 quarters, seemingly unable to get back to those pre-pandemic triple-digit growth figures. The company was forced to put on over $1 billion in debt in Q1 to remain solvent. Everything I review about this business points to an inept management team on top of a lousy business model. BYND is uninvestable from my perspective.
Why I Don't Like The Stock
First and foremost, this small alt-protein meat enterprise will not be able to just waltz into the CPG space and completely monopolize this niche. The big meat industry players like Tyson Foods (TSN - Free Report) , 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 and longstanding corporate relationships will be leveraged to put this start-up out of business.
Granted, Beyond Meat has secured some lucrative partnerships with global fast-food giants like McDonald's (MCD - Free Report) and Yum! Brands (YUM - Free Report) have justified some of BYND's upward move. However, its revenue in this segment has been unpredictable.
I am worried that this is a fad among younger consumers (where the primary demand is originating). The fact that this new plant-based meat isn't actually healthier than real meat may reverse its already hampered growth. 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 395% from its IPO price in May of 2019 (169% from its first publicly traded price) and is now falling out of market favor since it peaked in later January. The company is trading at a double-digit P/S multiple. Its deeper slips into a bottom-line and cash-flow deficit are a massive red flag for a company with such an uncertain future.
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 and r/wallstreetbets interest. I don't believe in Beyond Meat's growth narrative and think there are too many risks at its current valuations, notably the risk of never turning a profit.
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 (TSN - Free Report) 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 just 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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Bear Of The Day: Beyond Meat (BYND)
Beyond Meat (BYND - Free Report) is a meatless miracle with a valuation that has run far past this 'trendy' stock's intrinsic value. Sell-side analysts are beginning to rein in their expectations as the market euphoria surrounding this cliché new plant-based protein alternative dissipates, pushing BYND into a Zacks Rank #5 (Strong Sell).
BYND remains the one stock that stands out to me as overvalued on the Zacks Strong Sell list. I mean, you don't see many public equities that are 44% off their recent highs that still have 2 sell ratings, considering that analysts are not very likely to recommend something as a sell unless fundamentals are way out of whack with the share price.
I have been apprehensive about this glorified consumer packaged goods (CPG) enterprise since it hit the public exchanges in May 2019. The company was and remains unprofitable and faces massive competition that could quickly put this meatless fairytale out of business with leading players in the sector having far superior operational maturity.
Each quarterly report that Beyond Meat releases makes me further question its shareholders' rationality, who are keeping this increasingly profitless company at a double-digit forward P/S valuation.
In its Q2 report Thursday evening, BYND marginally exceeded revenue estimates but came in below Zacks Consensus Estimates for the 5th consecutive quarter. The company is getting further and further away from profitability every quarter, and despite experiencing sales growth abroad, its domestic performance has been abysmal.
Beyond Meat has seen massive topline deceleration over the past 4 quarters, seemingly unable to get back to those pre-pandemic triple-digit growth figures. The company was forced to put on over $1 billion in debt in Q1 to remain solvent. Everything I review about this business points to an inept management team on top of a lousy business model. BYND is uninvestable from my perspective.
Why I Don't Like The Stock
First and foremost, this small alt-protein meat enterprise will not be able to just waltz into the CPG space and completely monopolize this niche. The big meat industry players like Tyson Foods (TSN - Free Report) , 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 and longstanding corporate relationships will be leveraged to put this start-up out of business.
Granted, Beyond Meat has secured some lucrative partnerships with global fast-food giants like McDonald's (MCD - Free Report) and Yum! Brands (YUM - Free Report) have justified some of BYND's upward move. However, its revenue in this segment has been unpredictable.
I am worried that this is a fad among younger consumers (where the primary demand is originating). The fact that this new plant-based meat isn't actually healthier than real meat may reverse its already hampered growth. 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 395% from its IPO price in May of 2019 (169% from its first publicly traded price) and is now falling out of market favor since it peaked in later January. The company is trading at a double-digit P/S multiple. Its deeper slips into a bottom-line and cash-flow deficit are a massive red flag for a company with such an uncertain future.
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 and r/wallstreetbets interest. I don't believe in Beyond Meat's growth narrative and think there are too many risks at its current valuations, notably the risk of never turning a profit.
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 (TSN - Free Report) 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 just 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.