What To Do With Beyond Meat Stock?

Beyond Meat (NASDAQ:BYND) shares have been a roller coaster and for those investors still hanging in there, let me say, congratulations!

This isn’t a regular stock or a regular company. There are some really big positives here that come only once in a while and topmost on the list is the fact that this stock feeds new trends that have taken a while to develop. These trends would be things like wanting to protect the environment, be kind to animals, go vegan/vegetarian, go hormone-free, chemical-free, GMO-free, etc all for the sake of a healthy body. These aren’t concerns that will fizzle out in the next few years. And we finally have an instrument that can help us put a value to it.

And it doesn’t stop there. Not only is this company a play on these trends, but it’s also the first one on the scene. True, there’s some competition from Impossible Foods and vegan/combination meat both from traditional meat producers and otherwise. But while Impossible always comes up in any conversation about Beyond, there are key differences between them. So it’s also true that none of the others have managed Beyond Meat’s scale and popularity.

Its products are now available at nearly all major U.S. grocery chains. You also find them at over 77,000 restaurants and food service outlets. They’ve also expanded to over 65 countries across North America, Europe and Asia.

So naturally, revenue growth has been phenomenal from just $13 million in the first quarter of 2018 to $98 million in the fourth quarter of 2019 (up 654%). Revenue was up 239% last year. And of its two distribution channels, retail (which is basically grocery chains like Costco (NASDAQ:COST), etc that carry its products) grew 199% in the fourth quarter while restaurant and food service (representing its partnerships with companies like Dunkin’ (NASDAQ:DNKN) , Denny’s, Carl’s Jr, etc) grew 223%. So this is huge momentum.

Growth will likely come from existing distribution, further penetration into international markets, as well as possible new partnerships with McDonald’s (NYSE:MCD) , Yum’s (NYSE:YUM) KFC and Starbucks (NASDAQ:SBUX) . China remains a little uncertain because of the coronavirus, but management appears confident that China plans remain on track.

Of course this kind of growth means a constant pressure on capacity. So the company must keep investing. Management expects to have capacity for a billion dollars’ worth of product by year-end, by which time it will also have 11 co-packers. At the beginning of 2020, it could do $700 million worth with six co-packers.

So what to do with a stock that is basically a trendsetter? What to compare it with? These become increasingly difficult questions to answer.

On one side are meat producers (who are also making combination products) and meat lovers who are determined to keep this market alive. On the other are vegan and lab meat producers, all of which are struggling with things like finance, production efficiencies, scale and/or survival, depending on how much popularity and mind share they’ve managed to garner.

So the meat lobby is the greatest challenger to the other side. They have the money to make this a long and difficult battle. Moreover, most already have a plan to target customers who may want to eat less meat. A company like Beyond Meat, which is vegan, GMO free, soy-free, hormone-free, artificial ingredient-free can probably counter any argument against meat producers. However, it will materially drive up marketing cost.

And being the front-runner amongst its own kind and having achieved a certain level of success, it should also be financially sounder than its smaller peers. If it wasn’t investing so aggressively in the business, the company would be making a tidy profit now.

The shares are down 26% in the last month, but that’s still up 16% in the last three months and up 32% over the past year. While it’s hard to say for sure what exactly any stock will do, I do expect short term pain from capacity expansion and higher marketing cost, offset by gains from new deals and international expansion. So if you’re not in this for the long haul, not playing the long-term trends, it’s probably best to cash out while you still see some gains. For the longer-term, this remains a hot stock.

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