This website uses cookies to collect usage information in order to offer a better browsing experience. By browsing this site or by clicking on the "ACCEPT COOKIES" button you accept our Cookie Policy.

Competition Will Eat This Firm Alive

New Constructs

New Constructs
Visit: New Constructs


Investment Analyst

Since its high-flying IPO at $46, this stock has soared to $135. With such strong momentum and triple-digit year-over-year revenue growth, traders may push this stock higher. However, the fundamentals reveal this stock is more style than substance. Fiduciaries should avoid Beyond Meat Inc. (BYND: $135/share).  

While Beyond Meat’s stock performance is attractive to many momentum traders, investors with fiduciary responsibilities should consider the deteriorating fundamentals, weak prospects to compete at the scale of its competition, and the unrealistic increase in profits implied by the current valuation.

This report helps investors of all types see just how extreme the risk in BYND is based on:

  • Slowing revenue growth
  • More competition
  • The lack of competitive advantages that nearly all competitors possess
  • Doing the math: stock price implies huge increase in revenue/profits

Growth Will Slow Down, but Competitors Won’t

Beyond Meat’s massive revenue growth cannot last forever. The larger the firm gets, the more difficult it becomes to achieve large year-over-year (YoY) growth rates. Case in point, revenue grew 239% YoY in 2019, 141% YoY in 1Q20, and 69% YoY in 2Q20. Consensus estimates expect revenue will grow 61% YoY in 2020, and just 17% YoY by 2025, per Figure 1.

Going forward, Beyond Meat will find it even more difficult to grow revenue and profits as competitors flood the market.

Figure 1: Consensus Revenue Growth Estimates: 2020-2025

Consensus Revenue Growth Estimates: 2020-2025

Sources: New Constructs, LLC and company filings.
2020-2025 revenue growth rates based on consensus estimates

Competition is Plentiful and Has Competitive Advantages

Attracted by Beyond Meat’s impressive growth rates and soaring market value, multiple competitors are entering the alternative meat industry. Tyson Foods (TSN), the largest meat producer in the U.S., sold its stake in Beyond Meat in April 2019 and just a few months later announced the launch of its plant-based protein brand, Raised & Rooted. Some of the largest consumer food brands have followed suit.

Below is a short list of some of Beyond Meat’s alternative meat competitors:

  1. Incogmeato by Morningstar Farms, owned by Kellogg Co. (K)
  2. Simply Plant-Based Meatless Burger, a SYSCO Corp. (SYY) exclusive product
  3. Simple Truth plant-based meat, owned by The Kroger Co. (KR)
  4. Sweet Earth Brand, owned by Nestle (NSRGY)
  5. Gardein, owned by ConAgra Foods (CAG)
  6. Happy Little Plants, owned by Hormel (HRL)
  7. Boca Foods, owned by Kraft Heinz (KHC)
  8. Impossible Foods, privately owned
  9. Lightlife Foods, owned by Maple Leaf Foods

This list is not exhaustive and doesn’t include any of the traditional meat products that continue to garner a large share of consumer dollars.

Click Here to Read the Full Article

This article originally published on September 2, 2020.

Follow us onTwitterFacebookLinkedIn, and StockTwits for real-time alerts on all our research.

[1] Our core earnings are a superior measure of profits, as demonstrated in Core Earnings: New Data & Evidence a paper by professors at Harvard Business School (HBS) & MIT Sloan. The paper empirically shows that our data is superior to “Operating Income After Depreciation” and “Income Before Special Items” from Compustat, owned by S&P Global (SPGI).

Click here to download a PDF of this report.

Disclosure: New Constructs

Disclosure: David Trainer, Kyle Guske II, Sam McBride, Andrew Gallagher, and Matt Shuler receive no compensation to write about any specific stock, style, or theme.

About New Constructs

Our stock rating methodology instantly informs you of the quality of the business and the fairness of the stock’s valuation. We do the diligence on earnings quality and valuation so you don’t have to.

In-depth risk/reward analysis underpins our stock rating. Our stock rating methodology grades every stock according to what we believe are the 5 most important criteria for assessing the quality of a stock. Each grade reflects the balance of potential risk and reward of buying that stock. Our analysis results in the 5 ratings described below. Very Attractive and Attractive correspond to a “Buy” rating, Very Unattractive and Unattractive correspond to a “Sell” rating, while Neutral corresponds to a “Hold” rating.

Disclosure: Interactive Brokers

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from New Constructs and is being posted with permission from New Constructs. The views expressed in this material are solely those of the author and/or New Constructs and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

trading top