With the meat substitutes market heating up in recent years amid increasing competition, is Beyond Meat stock a good buy?
As more people turn to vegetarianism, veganism, or simply look to cut back on their meat consumption, companies like Beyond Meat (NASDAQ: BYND) have been benefiting. Buying tasty meat substitutes is a way that a lot of people transition to a meatless diet. While Beyond Meat has been the leading light in the market, is its dominance at an end?
The bull case for Beyond Meat
Despite increasing competition, the plant-based market is still growing significantly, expected to be worth an estimated $13.8 billion by 2027. Therefore, there is still plenty of room for Beyond Meat to grow. It also has a diverse range of products, including plant-based beef, chicken, and sausages. Beyond Meat has regularly been the best-selling meat alternative brand in the U.S.
While Q1 revenue missed its $114.35 million target, this still grew 11% year-on-year. The company is also seeing signs of improvement in the U.S. and certain overseas markets. Its retail U.S. business performed strongly, rising 28%, while its food services business dropped 26% due to the pandemic. Therefore, this side of the business will likely bounce back when restrictions ease.
Beyond Meat is looking at expansion inside and outside the U.S. in Europe and China. In the U.S., it has products in 28,000 retail stores, including Kroger, Walmart, and Target. Finally, it has deals in place to offer plant-based menu items to the likes of McDonald's and Yum Brands. The latter has Taco Bell, Pizza Hut, and KFC under its umbrella. It also is working with PepsiCo on creating beverages and snacks using plant-based protein.
The bear case for Beyond Meat
The Beyond Meat stock price has been very volatile in recent times. The announcement of a joint venture with PepsiCo in January saw its stock rise to $192 from $125. However, it has since dropped back to about $110. With such a high valuation following the PepsiCo announcement, any negative news was likely to send the price downwards. The Q1 results were worse than expected, contributing to the drop. Sales in 2020 as a whole were also significantly impacted by the pandemic.
A lot more companies are now entering the meat substitute space. One of Beyond Meat's main competitors is Impossible Foods, which has products in about 17,000 U.S. grocery stores, as well as about 20,000 restaurants globally.
Tyson Foods also announced recently it is launching a range of plant-based burgers. This is the largest producer of pork, poultry, and beef in the U.S. Therefore, it has the resources and market access to compete with Beyond Meat. In its recent earnings announcement, Beyond Meat noted issues with increasing competition.
So, should I buy Beyond Meat stock?
Beyond Meat does not look like a good buy at the moment. While its price has dropped a lot in recent months, it still appears to be overvalued. Increasing competition will likely lead to smaller margins and fiercer battles for market share. While Beyond Meat does have a good foothold in the market and some exciting partnerships, it needs a few strong quarters to instill confidence in potential investors.
Quickfire round:
Who is the CEO of Beyond Meat?
Ethan Brown is the founder and CEO of the California-based company.
Is Beyond Meat profitable?
Beyond Meat had a net profit of $1.8 million in Q1 2021.
When was the Beyond Meat IPO?
The Beyond Meat IPO was on May 2, 2019, and was initially valued at $3.8 billion.
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