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.
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