Calling Beyond Meat a Wall Street darling is an understatement. Its stock closed Friday at $177 per share, or roughly seven times greater than its IPO price of $25.
But like Bitcoin before it, investors are coming to grips with some hard facts about Beyond Meat (BYND), like the fact that its valuation is now greater than the entire market for U.S. plant-based foods.
Before the recent Wall Street meltdown, Beyond’s stock had reached $230 per share, putting the company’s valuation at $13 billion. That’s bigger than Wendy’s, Shake Shack, Red Robin and Jack-in-the-Box combined.
Staggering numbers, which is what has led investors to begin questioning the attraction of a relatively small company that had $67 million sales and posted $6.6 million in losses last quarter after a decade in business.
One Wall Street research firm, Consumer Edge, said, “We believe current valuation is pricing in the opportunity over the execution while not fully accounting for risks driven by competitor entrants into the market, potential penetration fatigue, success of unknown innovation and scaling capacity.”
A recent article in Forbes quoted analysts Haris Anwar with Investing.com saying, “Bitcoin and Beyond Meat have one thing in common: their meteoric surge has been fueled by investor frenzy to make quick gains without fully understanding the risks involved.”
Much of Beyond Meats’ success is built on the narrative that plant-based products offer a solution to many societal problems – obesity, high cholesterol, environmental decay. That sales pitch appeals to many younger consumers, but the company faces some major hurdles.
“There is no doubt that Beyond Meat has a great product in a growing market for vegan products, but investors should remember that the company isn’t yet profitable and it will soon face growing competition,” Anwar said. “Impossible Foods, for example, is going nationwide with Burger King offering its Impossible Whopper, while Tyson Foods is soon coming up with its own vegetable-based meat.”
Beyond Meat’s success, however, “relies on consumers not knowing what’s in their products,” writes Washington Times columnist Richard Berman.
“Beyond Meat’s fake meat is cutting against clear consumer trends regarding processed foods and artificial ingredients,” Berman says. “Investing in Beyond Meat may be a worse idea than opening a video store in the age of Netflix.”
Berman gently reminds his readers that fake meat doesn’t grow on a vine. “It’s made in industrial plants using industrial processes.”