Beyond Meat (NASDAQ: BYND)
January 15th, 2020
Updated: January 21st, 2020
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Beyond Meat is an American producer that specializes in plant-based meat substitutes. Founded in 2009, the company’s vegan products include synthetic chicken, pork, and beef, which became initially became available across the United States in 2012. Currently, Beyond Meat has product placements in over 35,000 locations including grocery stores, hotels, restaurants, and universities. Beyond Meat has also established partnerships with multiple restaurant brands such as Dunkin’, A&W, Tim Horton’s, and Subway. The company also has McDonald’s currently testing its product, “The Beyond Sandwich” in multiple locations across Ontario, Canada.
Beyond Meat’s stock was first made public through NASDAQ on May 3rd, 2019 at an IPO price of USD $25 and at an opening price of USD $66.75. It is currently one of the few plant-based meat production companies and vegan-focused companies overall to have their shares publicly traded in a U.S. stock exchange.
Although Beyond Meat is part of the food industry, it is more identifiable as being part of the vegan food subindustry and as such will be the main focus in the analysis.
The global vegan industry is estimated to be valued at approximately USD $13.37 billion in 2019 with forecasts predicting an annual growth rate of 9.1% over the next 7 years (USD $24.3 billion by 2026). The growth of the market has been attributed due to the following:
– Increased awareness of health benefits of plant-based products, and alternatives to meats and other animal byproducts such as milk;
– Growing negative reception of animal cruelty in meat production;
– Growing concerns towards greenhouse gasses produced by the meat industry that contribute negatively towards the global environment;
– Multiple celebrity endorsements towards the benefits of a vegan lifestyle. Examples of celebrities who identify themselves as vegan include talk show host Ellen DeGeneres, tennis athlete Serena Williams, musician Madonna, and former U.S, President Bill Clinton;
– Large food producers and restaurant chains such as McDonald’s and Burger King attempting to capture market share in this industry by adding vegan items to their menus.
Some of the key players in the industry include Beyond Meat, Impossible Foods, VBites, and Archer Daniels Midland Company.
Historical Stock Price
Between May and December of 2019, Beyond Meat’s stock price had endured aggressive fluctuations, once having reached an all-time high price (USD $234.9) only 3 months after its initial public offering. The stock has since fallen and currently moves between $75-$125 price range (See Figure 1 and Figure 2).
Figure 1: Beyond Meat’s Stock Graph (January 15th, 2020)
Figure 2: Beyond Meat’s stock price changes for each month since its initial public offering
Month Period (2019) ATVI Opening Price (Start of Month) ATVI Closing Price (End of Month) Price Change (USD $) Price Change (%)
The data shows that in the last 7 months, the stock experienced 3 consecutive months of value increases followed by 4 consecutive months of value decreases. The large fluctuations in prices cancelled each other out which resulted in the average returns of the stock equaling USD $1.1 or 1.56% per month.
In the first half of January, 2020 the stock price rose drastically as a result of a potential partnership with McDonald’s, peaking at a month high of USD $117 per share before falling to its current price. As of January 15th, 2020, the current value sits at USD $108 per share a 42.85% increase from January’s opening value and a 73.99% increase from the stock’s initial opening value in May, 2019.
Beyond Meat’s recent annual reports (Refer to Figure 4) show that the total revenues are increasing at a faster rate than the cost of revenue and operating expenses, an indication of increasing efficiency in its production and improvements in operations.
Figure 3: Beyond Meat Partial Annual Income Statement (All USD $ values in thousands)
In the first three quarters of Beyond Meat’s 2019 fiscal year, the company has already outpaced its fiscal 2018 revenue despite not having reported their 2019 final quarter results as of yet. (See Figure 4).
The combined Quarters of 2019 has a Gross Margin and Operating Margin of 33.24% and 2% respectively, a large improvement from last fiscal year’s values of 19.99% and -30.1%.
Despite Beyond Meat’s financials showing improvements such as growing revenues, decreasing net losses, and improved margins, it is not enough to justify the high price of its shares, making them seem grossly overvalued. In late-2019 the stock’s value continuously diminished in spite of growing financial improvements, signifying that the company’s financials have less influence on the stock than once perceived.
Beyond Meat’s stock value is volatile as it is highly susceptible to sudden fluctuations that resulted from news sources. For example: in the mid-January, 2020 celebrity endorsements by rapper Snoop Dogg and television personality Kim Kardashian combined with the fact that Beyond Meat became the sole contender for the deal with McDonald’s (Impossible Meats dropped out in early January), caused the price to rise from $83 to over $117 (+41%) in a matter of days. Therefore, Beyond Meat is heavily reliant on positive reception to grow its stock price; a confirmation of a worldwide deal with McDonald’s would mean lucrative gains to the investors. However, the reverse is also true; any negative reports such as McDonald’s canceling their current partnership or issues with meeting demand can spell disaster for the stock’s price. Furthermore, the barriers to entry in the vegan market is low and will result in more competitors in the near future, especially those that have larger portfolios to mitigate risks/losses from the beginning phases of competing in the market.
Overall, the conclusion is that Beyond Meat’s stock is overvalued and very volatile; active investors should proceed with caution when dealing with it. The current rate at which the stock is growing can easily be reversed by a negative report, especially if the deal with McDonald’s doesn’t fall through. With multiple reports of analysts now downgrading the stock due to concerns of overvaluation, the stock will likely remain strong in the short term especially when they release their annual financial report in February. Investors who are risk takers should consider purchasing put options with at least a 1-year expiration date after the earnings report has been released.
For passive investors, it is not recommended to purchase the stock at its current price, especially considering the factors such as future competitors and sensitivity to news reports. Instead, passive investors should consider the ETF (exchange traded fund), US Vegan Climate ETF (VEGN) where it currently has holdings in companies that have no involvement with animal products (Tesla, Apple, Microsoft, and Beyond Meat are some of its holdings). The ETF was first made available in September, 2019 for $25.24 which has since grown over 10% (as of January, 2020) and will likely continue to grow with the current market conditions.
As of January 21st, Beyond Meat’s stock is valued at over $129, a 20% increase from the last value reported ($108) due to Starbuck’s announcement on adding plant-based items on their menu.
Acumen Research & Consulting. (2019, June). Vegan Food Market Size: US$ 24.3 Billion by 2026. Retrieved January 2020, from Market Watch: https://www.marketwatch.com/press-release/vegan-food-market-size-us-243-billion-by-2026-2019-06-18
Beyond Meat. (2020). Beyond Meat Main Page. Retrieved January 2020, from Beyond Meat: https://www.beyondmeat.com/
Google. (2020, January). Beyond Meat Inc. Stock Quote. Retrieved January 2020, from Google: https://www.google.ca/search?sxsrf=ACYBGNSfU6riJCM4uWlzSV14z1G5KNci7A%3A1579117960175&source=hp&ei=iG0fXo_oBYvl5gL14JvIAw&q=beyond+meat+stock&oq=beyond+me&gs_l=psy-ab.1.0.35i39i285i70i250j35i39l2j0l5j0i131l2.295229.296409..296951…2.0..0.100.743.7j1……0….1..gws-wiz…..10..35i362i39j35i39i285.ZmsXXAKBles
Market Watch. (2020). US Vegan Climate ETF. Retrieved January 2020, from Market Watch: https://www.marketwatch.com/investing/fund/vegn
Taylor, K., & Hanbury, M. (2020, January). McDonald’s is Testing Its Beyond Meat Burger at More Locations. Retrieved January 2020, from Business Insider: https://www.businessinsider.com/beyond-meat-is-testing-beyond-meat-burger-at-more-locations-2020-1
Yahoo Finance. (2020). Beyond Meat Inc. Fincials. Retrieved January 2020, from Yahoo: https://finance.yahoo.com/quote/BYND/financials?p=BYND