When Beyond Meat (NASDAQ: BYND) went public two weeks back, it surprised the Wall Street by winning a better response than other popular firms such as Uber (NYSE: UBER) and Lyft (NASDAQ: LYFT). The stock, which was offered at $25 per share, ended the first day of trading at $65.75. Two weeks into trading, BYND continues its rally, increasing 218% from its offer price, making it the most successful IPO so far this year.
The stock did see a downward trend last week, before going up once again. So is the stock set for a long rally, or is a valuation plunge in the making? Let’s see.
Competition
Much of the rally has come from investor confidence in the alternate meat industry, which is set to grow at an annual rate of 40% for the next 10 years. While this argument holds true, rising competition in the segment could hamper Beyond Meat’s lofty ambitions.
The company has already established an excellent delivery network and supply chain throughout the US and Canada, but it is facing rising competition from rival Impossible Foods, besides traditional food companies like Tyson Foods (NYSE: TSN) and Hormel Foods (NYSE: HRL).
In fact, Tyson Foods has been experimenting with lab-processed meat, which could pose a greater threat to Beyond once it reaches the market.
Fundamentals
The El Segundo, California-based firm’s annual revenues increased 175% in 2018 to $88 million. However, even this topline doesn’t justify its current market cap of $5.46 billion. The valuation represents over 62 times its annual revenues, which is an outlandish figure given that the company hardly makes any money.
Separately, it also needs to be noted that 2018 was its first year when revenues were higher than the cost of goods sold.
Short interest
Despite the stock rally and the optimism in the market, there has been a drastic increase in people shorting the stock. As per the latest stats, over 40% of its shares are currently being shorted, indicating that more people are finding Beyond Meat’s valuation ludicrous and expect it to fall shortly.
Get access to timely and accurate verbatim transcripts that are published within hours of the event.
Most Popular
What to look for when CVS Health (CVS) reports Q3 earnings
Healthcare company CVS Health Corporation (NYSE: CVS) is all set to report earnings next week, with Wall Street expecting a mixed outcome. The company has been facing challenges in certain
eBay (EBAY): A few factors that helped drive growth in Q3 2024
Shares of eBay Inc. (NASDAQ: EBAY) stayed green on Friday. The stock has gained 32% year-to-date. The ecommerce leader delivered revenue and earnings growth for the third quarter of 2024,
CVX Earnings: Chevron reports lower revenue and profit for Q3 2024
Energy exploration company Chevron Corporation (NYSE: CVX) on Friday announced third-quarter 2024 financial results, reporting a decline in net profit and revenues. Net income attributable to Chevron Corporation dropped to