Beyond Meat: the record-breaking stock that is inspiring some analysts to compare it to Bitcoin. While many were skeptical of the IPO initially, it quickly proved the cynics wrong: just a week after its IPO, it had gained 240% of its value. But the heightened value of this stock also leads to questions regarding its volatility, and for many it still isn’t a “buy.” In fact, it’s started falling in recent days, and may just continue to fall.
Beyond Meat (BYND) is the first major stock to come to market for vegetable-based “meat” products. Beyond Meat makes “ground beef” and “ground beef patties” with a pea-based protein; it’s mostly used in convincing mock hamburgers. Vegetable-based faux meat products are steadily becoming more popular and mainstream, not only due to ethical concerns regarding factory farming, but also because vegetable products are more sustainable long-term.
Since the vegetable-based meat industry is likely to continue growing in the future, Beyond Meat rose dramatically as many speculators wanted to get in on the ground floor. And because it shot up so sharply, other people piled on — in a rise that many are saying corresponds with cryptocurrency. That’s something that could be concerning to investors, but that doesn’t necessarily mean that they shouldn’t invest.
While Beyond Meat may be the first to hit the market, the Impossible Burger is widely considered to be a better meat-like substitute. However, it hasn’t made any date for an IPO on its own. Because the Impossible Burger is both considered to be a better product and a stronger company, some investors have hesitated to move forward.
That being said, two competing companies within a brand new industry space really isn’t a concern: there’s room enough for both of them if the industry is as big as analysts project. The larger concern is whether Beyond Meat itself is overvalued. The stock has increased sharply in price so significantly that it’s worrisome, especially after many valued it at under its initial IPO valuation.
Beyond Meat closed its opening day at a valuation of $65.75 and peaked on May 7th at $79.17. But as of May 12th, it closed at $66.22, briefly dipping below its opening day price. Despite all of this, it’s still far ahead of its public offering price: an incredibly low by comparison $25. But all of the gains that it made after opening day have already been lost. This is likely due to investors selling out fast once they saw the volatility within the market, but it leaves very little information about what could be in the company’s future. Either it could continue to rise as investors cautiously by back in, or it could enter into a free fall as buyers realize that the product was over-invested.
Based on its fundamentals, it seems clear: Beyond Meat is currently far overvalued. But its price wasn’t rising based on fundamentals. Beyond Meat got locked into speculation, and many investors are now investing because of FOMO (Fear of Missing Out). That means that regardless of Beyond Meat’s actual value, its current valuation is primarily built out of emotional investing.
That doesn’t mean that it isn’t a buy, and it doesn’t mean that it won’t go up.
All Beyond Meat needs to continue to rise in price is for investors to continue thinking that it will continue to rise. This is precisely the issue that has led analysts to compare Beyond Meat to cryptocurrencies: because the valuation is largely theoretical.
Whether or not Beyond Meat is a buy now, there’s one thing that’s sure: investors who snagged the initial IPO price are likely going to be winners regardless. It’s clear that the market is ready to support meat-less companies and it’s likely that the Impossible Burger IPO, when and if it comes, will also be very successful.
It’s impossible to say whether Beyond Meat’s valuation is going to rise again, because currently its valuation is not based on fundamentals: it’s based on speculation and FOMO investing. Consequently, it’s a high risk high reward proposition, and it’s likely that the market is correcting the issue already. Investors should likely sit back and see how the next few weeks play out for the volatile stock.
Regards,
Ethan Warrick
Editor
Wealth Authority
