Beyond Meat: An Overpriced Falafel

About: Beyond Meat, Inc. (BYND), Includes: NSRGF, NSRGY, TSN


George Atuan, CFA, Seeking Alpha

Jul. 6, 2019




         I cooked, tried and compared a Beyond Burger to a real burger. Beyond Burger tastes like a falafel.


         Beyond Meat's stock price implies a 56% annual revenue growth for the next 8 years.


         There are seven problems with Beyond Meat from operational, competitive, health-wise and economical.


         The closest catalyst would be the lock-up period expiring on Oct. 29.


         I would recommend to stay away from the stock. Only short if the borrowing cost or options are more reasonably priced.


When I first heard about Beyond Meat (BYND), I liked what the company is doing to the environment and animal welfare. I did not look at the IPO, but as the stock has surged over 6 times since its IPO, I wanted to see what all the fuss was about.


First, I had to try the product, I was happily surprised when I found Beyond Burgers down here in Chile. I cooked regular burgers and the Beyond Burgers to compare them side by side. I was surprised by how good they tasted, but they didn't taste like the real thing and I donít see how carnivores such as myself would replace real burgers for Beyond Burgers... yet.


Beyond Meat was founded in 2009 and produces burgers and sausages that look, feel and taste almost like the real thing. Opposite to veggie-burger companies, BYND has been pushing their product as a meat replacement rather than a veggie burger, so instead of finding the Beyond Burgers along with veggie products, you can find them in the meat aisles in supermarkets. While I love the company, management and the potentials of the product, I think the stock is a bad investment for the seven reasons stated in this article. But shorting the stock is expensive (borrowing cost is close to 80%) and risky as the market can continue to be irrational for a while (look at Netflix (NASDAQ:NFLX) and its price irrationality. If you are interested, you can find more detail about my view on Netflix in this article). So, rather than shorting the stock or using puts, I would recommend not owing it, or if you follow an index strategy, to be underweight the name.


The seven reasons for not buying the stock are:


Problem #1: Tasty but far from tasting like a real burger


Problem #2: No moat


Problem #3: Tough Competition Ahead


Problem #4: Production Bottleneck


Problem #5: Unattractive business economics in steady-state


Problem #6: Not a Healthy Substitute


Problem #7: Valued to perfection


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