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Bear of the Day: Beyond Meat (BYND)

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With the prices of beef and chicken reaching new highs, you might expect that the fortunes of a company that makes plant-based meat substitutes would be soaring, yet unfortunately that’s not the case for Beyond Meat (BYND - Free Report) .

After a meteoric rise that saw Beyond Meat shares rally more than 900% in the first three months as a public company in 2019, those shares fell back to earth and have mostly trended sideways over the past two years, never quite living up to the potential of the company’s extraordinary promise.

It’s a great story. Los Angeles-based Beyond makes products that have the taste and texture of ground beef, meatballs, sausage links and breakfast sausage patties. Made primarily from pea, potato and rice proteins, vegetable lipids and fruit juices, Beyond created products that not only taste like the meat products they replace, they brown up during cooking and even “bleed” a bit when sliced or bitten into just like the real thing.

More importantly, their production does not contribute to greenhouse gasses being released into the environment the way that traditional ranching does. Consumers could feel as though they were contributing to climate change relief while also enjoying something awfully close to their favorite hamburger or breakfast sandwich. Beyond products also contain no GMOs, soy or gluten.

Sold in grocery store refrigerator cases as well as in national quick-service chains like Dunkin Brands , consumers debated how much they liked the ersatz meat, but also quickly discerned that the Beyond products nutritional composition meant they weren’t any healthier for human consumption that the genuine met products they were intended to replace.

To create the appearance and texture of the real thing, a Beyond burger patty contains just as much total and saturated fat as one made from ground chuck, though the fat comes from vegetable sources. For taste, Beyond used a strategy that’s been employed by chefs around the world for millennia – salt.

The Beyond hamburger patty contains about 5 times as much sodium as a quarter pound of 80 % lean ground beef (380mg vs 75mg) and a comparable number of calories. It also contains 5g of carbs - while the ground beef patty contains zero.

Finally, the Beyond products aren’t inexpensive, costing just as much or more than the beef and pork they replace. That has hurt the company’s efforts to partner with fast-food chains who manage food costs down to fractions of a cent – and also sell millions of servings of their popular items daily, greatly multiplying the effect of more costly ingredients.

Beyond Meat currently doesn’t turn a net profit and missed the Zacks Consensus Earnings Estimate significantly in each of the last 4 quarters with larger than expected losses.

Zacks Investment ResearchImage Source: Zacks Investment Research

 

Widening loss forecasts for 2021 ($1.08/share) and 2022 ($0.29/share) contribute to a Zacks Rank #5 (Strong Sell).

Zacks Investment ResearchImage Source: Zacks Investment Research

 

Despite just $500-600 million in annual sales, BYND currently enjoys a market cap of greater than $9 billion with no prospect of net profits in sight.

Though I don’t personally have any dietary pr3ferences or restrictions that would keep me from eating traditional meat products, I went out of my way to try as many Beyond products as possible and I found them to be quite tasty. I especially like the idea of eating a more environmentally sustainable “meat.”

As an investment however, it’s hard to recommend the stock at these price levels. In the very competitive food industry, better ranked and more reasonably valued alternatives like Bloomin Brands (BLMN - Free Report) or Papa Johns (PZZA - Free Report) are a much tastier alternative.

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