Beyond Meat Stock Faces First Real Setback: Is BYND Stock on the Way Down?

Beyond Meat Stock Faces First Real Setback
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Beyond Meat Stock Prediction

There has been no breakout success story quite like Beyond Meat Inc (NASDAQ:BYND). Beyond Meat stock peaked in late August, soaring 800% since the company’s initial public offering (IPO) in May.

But since then, BYND stock has fallen over the past few weeks. Does that mean this stock is finished?

If investors got in early and are looking to lock in profits, now could be a good time for them to sell. But for new investors, what is my Beyond Meat stock prediction?

First we have to acknowledge the changing landscape of the meat-alternative industry. One of the biggest boons for BYND stock was that Beyond Meat Inc was the first and only company to go public with this particular mandate in mind: providing a new alternative to the previously available veggie food options.

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The company was able to pull that off and we have seen that success translate into stock-price growth.

Fast-food chains like McDonald’s Corp (NYSE:MCD) and Dunkin Brands Group Inc (NASDAQ:DNKN) are showing interest in the company’s “Beyond Burgers.”

Beyond Meat’s entry into the U.S. fast-food market would naturally translate into huge revenue growth, which in turn would lead to stock-price increases. After all, its products being available in the myriad number of McDonald’s restaurants would mean recurring solid revenue for years to come.

Beyond Meat Inc has already posted some impressive numbers.

Sales grew 287% year-over-year in the second quarter, and Wall Street projects that full-year sales will total more than $420.0 million in 2020, up from about 60% in 2019. (Source: “Beyond Meat Stock Dropped Because Serious Competition Is Closing In — Fast,” Barron’s, October 17, 2019.)

Major banks are interested in what Beyond Meat has to offer. JPMorgan Chase & Co. (NYSE:JPM) analyst Ken Goldman wrote that he “would not be surprised if a large quick-service restaurant were added as a customer this year.”

Goldman added, “For what it is worth, board member Don Thompson, who owns approximately 5% of the Beyond shares, is the former CEO of McDonald’s.

And the industry is very much in its infancy. There’s a lot of room left for meat-alternative stocks to grow. Wall Street estimates that the global meat-alternative category could hit anywhere from $15.0 to $40.0 billion in 10 years, up from the less-than-$1.0 billion now. (Source: Ibid.)

So on the face of it, things look great for Beyond Meat. It’s the industry leader in a market that’s quickly growing and is exciting investors and analysts all around the world.

The problem? Competition.

Many heavy-hitters in the food industry (and even some outside it) are planning on making their own meat-alternatives to compete with Beyond Burgers. While Beyond Meat Inc is without a doubt the global leader now, that could change, hence there’s concern about the current BYND stock price.

Impossible Foods Inc. and its flagship product, “Impossible Burger,” is perhaps the largest and most well-known competitor that is trying to chip away at Beyond Meat’s market share.

Impossible Foods, it’s worth noting, has received backing from the United Nations and Bill Gates, to name a few, making it a tangible threat to Beyond Meat.

That’s just one example of a meat-alternative company that’s looking to eat Beyond Meat’s lunch. Which is to say that Beyond Meat’s growth in such a short period has attracted many companies to the sector and has made going public all the more enticing.

This could hurt Beyond Meat in two ways.

One is that, with other companies cutting away at Beyond Meat Inc’s market share, competing with it for business deals, and forcing its prices down, its revenue could be reduced.

The other is that, by having too many meat-alternative IPOs launch in an attempt to recreate the Beyond Meat IPO magic, the market could  become oversaturated.

In both cases, Beyond Meat stock could be badly burned.

Wall Street is taking note of these potential threats, slashing BYND stock’s outlook in recent weeks. The result has been that the stock has plummeted quite severely from its peak, losing more than half its value.

Chart courtesy of StockCharts.com

And there’s one more problem on Beyond Meat stock’s horizon: its lockup period ends on October 29. That means a good portion of approximately 48 million shares (about 80% of the shares outstanding) will become eligible to trade freely on the public market.

This could not have come at a worse time.

As I outlined above, BYND stock has slid significantly over the past few weeks, and many shareholders have been itching to trade on their massive gains. Not wanting to risk losing more value, and possibly seeing the 300% growth as more than enough, these shareholders could initiate a massive selloff.

“Given the dramatic appreciation since the IPO, we expect many insiders and private equity funds to cash out, putting further downward pressure on the stock,” wrote Arun Sundaram of CFRA Research. (Source: “Beyond Meat Insiders Will Finally Be Able to Cash in Their Shares Next Week,” Markets Insider, October 21, 2019.)

That risk is very real, and considering there’s already a $672.0-million short-seller position in Beyond Meat stock (according to financial-analytics provider S3 Partners), there’s certainly a lot of concern in the market right now.

This possibility of a sell-off could be counteracted by a strong quarterly earnings report, which will be released shortly after the lockup period ends. Still, at the moment, there’s a lot of volatility surrounding BYND stock that could lead to a pullback.

BYND Stock Future

My Beyond Meat stock prediction in the short term is bleak. I don’t see its share price rising much for the remainder of 2019—at least not unless it faces significant falls first or is able to score a truly monumental business deal.

There’s still a very good chance that Beyond Meat will turn into an industry juggernaut for decades to come. As such, it could see its share price grow several times over, provided it’s able to ward off competitors and keep its revenue solid.

Furthermore, the meat-alternative industry is providing a lot of opportunities for investors to watch and wait. The next competitor that enters the market to challenge Beyond Meat—Impossible Foods, say—could become another huge winner that’s worth investing in.

The meat-alternative industry is just getting started. There are so many opportunities for investors to win big in the industry that BYND stock’s near-term forecast should not be enough to turn investors off the industry forever.

Analyst Take

Beyond Meat Inc has been perhaps the most exciting company in 2019. It’s hard to dispute 800% stock gains in as few as 10 weeks.

On the flip side, with a great rise comes the possibility of equally rapid falls, and Beyond Meat stock may be heading for a massive sell-off in the near future.

Again, if investors got in early, now may be a good time to cash out. As for newer BYND stock investors, all hope is not lost.

If they didn’t quite get in early enough to score massive gains, there’s still a chance for profit (if they’re not risk-averse). There is tons of potential within Beyond Meat stock for the coming years.

I’ve been covering the legal marijuana industry for years now, and I can say with confidence that the meat-alternative sector has me just as excited as I was when pot stocks first hit the market.

Which is to say I foresee triple-digit growth for many companies that enter this space in the coming years. Investors would be doing themselves a disservice if they don’t pay attention to meat-alternative stocks.