Beyond Meat (BYND) has surpassed investor expectations since the debut of its IPO earlier this May. Though there is plenty of investor enthusiasm for this vegan food provider, it must be tempered by the sobering reality that Beyond Burgers are far from delicious.
Give a Beyond Burger a chance and you might not even finish it. Those with refined palates are adamant Beyond Burgers are relatively tasteless. However, there is still the potential for this hot stock to continue its upward ascent.
Part of the reason why Beyond Meat’s stock popped in the weeks following its IPO is the fact that the company has deals in place to sell its vegan meat substitutes outside of the United States. The company partnered with Zandbergen World’s Finest Meat to construct a manufacturing plant in the Netherlands. This is Beyond Meat’s first production plant located away from the United States. The manufacturing facility should be operating at full capacity by March of 2020 at the latest. The corporate tandem also have a European distribution contract to bring Beyond Meat products to environmentally-conscious eaters and animal rights activists across the continent.
All in all, Beyond Meat has a valuation around the $5 billion mark. The question is whether this valuation will prove sustainable in the months and years ahead. Though the company’s European manufacturing facility will certainly spike its operational efficiency and fast-track the path to profitability, savvy investors are questioning whether the stock is worth its current premium. If you are on the fence as to whether Beyond Meat is worth your hard-earned money, consider the fact that its current $5 billion valuation represents about 55 times its current sales. This valuation is also seven times the company’s current enterprise value.
While Beyond Meat currently enjoys a lot press, it should be noted that it is not alone in the vegan “meat” game.
Ask those who have abided by a vegan diet for years about the taste of Beyond Burgers, and you will receive mixed reviews. Experienced vegans are well aware of the fact that there are multiple tastier meat substitutes on the market. Though Beyond Burgers certainly bear an aesthetic similarity to regular hamburgers containing cow meat, they do not taste exactly like traditional hamburgers. Those who have tried Amy’s veggie burgers, Dr. Praeger’s veggie burgers, and even Burger King’s veggie burger will testify that these offerings taste better than the Beyond Burger.
The inferior taste of Beyond Meat’s products does not bode well for its future. However, just about every veggie burger is a work in progress. There is still a chance Beyond Meat’s offerings will improve in taste as time progresses. The pressing question is whether Beyond Meat’s culinary masterminds will create meat substitutes that can compare with those offered by the competition. Power players ranging from Chick-Fil-A to TGI Friday’s, McDonald’s and QDOBA are working on meatless offerings that provide protein in a green and ethical manner.
It must be noted Beyond Meat has partnered with Tim Hortons, an uber-popular coffee, pastry and sandwich shop with locations throughout Canada and the northeastern part of the United States. The fake meat supplier will provide Tim Hortons locations with meat substitutes for its breakfast sandwiches. If successful, this relationship could prompt other fast food companies to rely on Beyond Meat to meet their meatless needs (pun intended) rather than invest in in-house efforts to create their own meat substitutes. Time will tell if Beyond Meat’s relationship with Tim Hortons will generate the intended results.
Investors who hold stock in Beyond Meat are encouraged to sell or hold. Beyond Meat has certainly cleared a path for other vegan companies to make a splash on Wall Street. However, Beyond Meat’s stock is overvalued at the moment. Even if the company gains a share of the $1.4 trillion worldwide meat market and millennials continue to adopt vegetarian and vegan diets, this company is not worth its current price tag.
The plain truth is Beyond Burgers do not taste nearly as good as other meat substitutes. If you have not invested in Beyond Meat, do not take the bait. Those who got in at the ground level should consider selling a portion of their shares. If Beyond Meat eclipses the $100 mark, profit-taking is an inevitability. Do not get sucked up into the wave of investor enthusiasm over this over-hyped stock. Look for BYND to fall back to the $70 to $80 range by the end of the year.