When Beyond Meat debuted on the stock market in early May of this year, expectations were understandably elevated. The plant-based meat alternative launched its initial public offering at $25, opened at $46, and concluded its first trading day at $65.75. Since then, shares have soared to as high as $201.88. Recently, underwriter JP Morgan downgraded the stock to “overweight,” with a target price of $121 per share. However, this week’s announcement that Beyond Meat will expand beyond its pre-formed burger patties to offer its plant-based meat substitute in 1 lb “ground beef” packages—ideal for dishes like meatballs and Bolognese sauces—has rekindled interest and driven the stock price upward.
As an M&A executive rather than a stock analyst, I find the valuation surge appears somewhat inflated. Investors and speculators have jumped aboard, resulting in significant losses for short sellers. Disruptor stocks like Beyond Meat will always exhibit such dynamics. Despite the downgrade, substantial support for the stock and its market potential persists, particularly since it is currently the only pure-play public company in this category available to investors. While its closest competitor, Impossible Foods, might consider going public eventually, it seems well-funded enough to remain private for the time being.
When analyzing the Beyond Meat downgrade, its stock volatility, and overall valuation dynamics, two key factors must be considered: the top-line sales opportunity and the company’s capacity to capitalize on it. Clearly, there is a mainstream market for plant-based protein, as consumers are increasingly drawn to meat substitutes due to environmental sustainability and the ongoing shift towards healthier eating. Beyond Meat has successfully developed a burger option that is widely regarded as delicious, leading consumers to believe they are reducing their environmental impact. These factors combine to create a significant sales opportunity. As long as it remains evident that the carbon footprint of these products is considerably lower than that of beef and other meat proteins, the market will continue to expand.
Another aspect of the top-line opportunity is the competitive landscape. Beyond Meat faces competition from Impossible Foods, which has secured substantial private funding (most recently $300 million at a $1.5 billion valuation) and is experiencing remarkable growth. Major food corporations like Tyson and Nestlé are also venturing into this space. Tyson plans to launch its new “Raised & Rooted” brand this fall, featuring nuggets made from pea protein and a hybrid meat/pea protein burger.
The plant-based food sector reflects a significant consumer trend, targeting not just vegans or vegetarians, but also “flexitarians” who aim to increase their weekly intake of plant-based meals as part of a healthier and more sustainable lifestyle. Numerous companies are innovating in this space, offering delicious and healthy plant-based options instead of traditional substitutes. Notable examples include innovative veggie-based products from major brands like Conagra’s Birdseye and B&G’s Green Giant, as well as emerging players like the Irish company Strong Roots, which won a prestigious NEXTY award for its Kale & Quinoa Burger, set to launch in over 3,000 U.S. stores this year. Additionally, Perdue is entering the market with its “Chicken Plus” line, which includes nuggets, tenders, and patties made from white meat chicken mixed with chickpeas, cauliflower, and plant proteins.
The increasing variety of competitive products addressing these trends presents some risk to long-term growth for companies like Beyond Meat, which must execute effectively to maintain their competitive edge. However, it also positions them at the forefront of a trend poised for continued expansion.
This brings us to the execution aspect of Beyond Meat’s valuation dynamics. Both Beyond Meat and Impossible Foods benefit from first-mover advantages, but much will unfold before we can identify the winners and losers in this market.
The outlook appeared bright for Impossible Foods after it secured a partnership with fast-food giant Burger King to supply the meatless “Impossible Whopper,” with plans to roll it out to all 7,300 U.S. locations by the end of the year. Already a supplier to 7,000 restaurants—including Red Robin and White Castle—this collaboration effectively doubled Impossible Foods’ reach. However, recent reports indicate that the company’s struggle to increase production has led to shortages at restaurants.
Clearly, fulfilling contracts is crucial. Even a company that creates and distributes an exceptional product can face stock price volatility and negative scrutiny if it fails to meet vendor and consumer demand. Turning away customers is never a sound marketing strategy. It is vital for Beyond Meat to learn from Impossible Foods’ supply issues, anticipate product demand, and execute profitably. This will undoubtedly impact the company’s long-term valuation.
As the only currently available investment option and one of the two leading players in the market, Beyond Meat is well-positioned for continued growth, fueled by a strong consumer trend. While operational challenges must be addressed, the demand for tasty plant-based protein alternatives remains high, and Beyond Meat is one of the few companies recognized for its ability to deliver. Additionally, it’s worth noting that many consumers are becoming more aware of health benefits associated with plant-based diets, including the role of nutrients like calcium. While exploring alternatives, many are curious about what calcium citrate does in relation to their health and dietary choices, emphasizing the growing importance of nutritional information in today’s market.