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Stating the Obvious: Beyond Meat (NASDAQ: BYND) Is Priced Beyond Perfection

Written by Jason Stutman
Posted September 21, 2019

Back in May, I wrote to members of my Technology and Opportunity investment advisory, highlighting a stock that, at the time, was gearing up to be one of the hottest plays on the market.

The company in focus was Beyond Meat (NASDAQ: BYND), a veggie burger brand with marketing so effective, it was able to convince investors it wasn’t actually selling veggie burgers (even though it was). 

Still, the company hit the scene with so much hype we just couldn’t ignore it, so when I pointed readers to Beyond Meat, I did so with a big fat asterisk: shares were going to rally, then quickly collapse.

At the time of that company spotlight, shares were trading around $85. Fast-forward to the end of July, and the stock had nearly tripled to $234. 

There was your rally.

It was the height of the summer, and everyone with a brokerage account was telling you at the weekend cookout that Beyond Meat was the next big thing. This, of course, was a major red flag and the peak of the hype cycle for the company. 

Temperatures eventually cooled down, and so did shares of the imitation meat maker. All told, the stock has dropped 34% off its peak. 

There’s your collapse (or at least the start of it).

Fake Meat Faceoff

This week, Beyond Meat and its investors received some relatively unwelcome news. Not only was Tim Hortons dropping the company’s products from its menus, but competing imitation meat maker Impossible Foods also announced the rollout of its Impossible Burger 2.0 in grocery stores across the U.S.

Until now, Impossible Foods has been exclusively selling to restaurants — over 17,000 in total. Now it will compete with Beyond Meat directly for the first time.

Launched on Friday, the Impossible Burger 2.0 is now available in 27 Gelson’s Markets stores in Southern California. It’s a soft launch, but the company plans to bring the burger to more grocery stores through 2020. That includes several on the East Coast later this month, then in every region of the U.S. by the middle of next year.

To give credit where it’s due, Beyond Meat remains way ahead of Impossible Foods on the distribution chain at the moment. The former can be found in Whole Foods, Kroger, Safeway, Publix, Wegmans, Target, and Sprouts. 

That said, it’s unlikely Beyond Meat will remain in this position for long. Not only do these kinds of fads tend to fizzle out pretty quickly, but Impossible Foods is going to put on some serious pressure with what’s an overwhelmingly superior product.

The fact of the matter is that despite Beyond Meat’s best marketing efforts, its flagship product is really just a veggie burger in disguise. The patty is made of pea and rice protein, while its “juices” are made of coconut oil and some apple and beet extract to add a bloody color. 

Seriously, that’s it. There is nothing inherently “meaty” about Beyond Meat’s products. There is no real science to make it taste like meat — just branding and gimmicks.

The same, however, cannot be said about Impossible Foods, which is taking a far more meticulous and scientific approach to its product development. This strategy has made the initial rollout a bit slower, but it will prove the more successful strategy over the long run (I cannot wait until this company goes public).

Taste tests comparing the Impossible Burger to the Beyond Burger are near unanimous in their conclusion that the former tastes more like real beef, while the latter leaves you with more of a coconut-flavored aftertaste. That’s not to say the Beyond Burger isn’t any good, but it does mean it’s just a veggie burger parading as something else.

The Impossible Burger pulls off what the Beyond Burger can’t because its developers actually looked at what makes meat taste like meat... then they replicated it.

Science Prevails Over Gimmicks

To a great extent, the taste you get from biting into a real burger comes from a molecule known as “heme.”

Heme is an essential molecule found in every living plant and animal, but it’s most abundant in the latter. Hemes are a core component of hemoglobin, the pigment that gives blood its distinctive red color.

More importantly, though, hemes are iron-containing compounds that give meat its distinctive taste. Impossible Foods makes its own heme using a proprietary fermentation process. The end product is a meatless protein that bleeds, sizzles, and tastes like the real thing.

Is it perfectly indistinguishable from beef? No, not yet...

But it’s definitely close, and Impossible’s scientific approach is only going to move its products further toward that point as time moves forward.

Meanwhile, Beyond Meat will remain stagnant, pretending to be something it’s not.

Sure, the company will show some further growth on the top line next quarter, but nothing to justify the 44x sales ratio and $9.3 billion market cap it's currently trading at.

Beyond Meat (NASDAQ: BYND) is an easy sell. In the meantime, keep an eye out as we track the inevitable Impossible Foods IPO.

Until next time,

Stutman Signature

Jason Stutman

P.S. Barclays initiated $BYND at overweight on Thursday with a price target of $185, but you can take that with a grain of salt. This is the same investment bank that put an overweight rating on Retrophin (NASDAQ: RTRX) in April, before the stock collapsed 40%. 

Meanwhile, we closed $RTRX out for an 11% return earlier this year. If you want independent stock research that actually works (and doesn’t cost you an arm and a leg), I invite you join over 25,000 other Main Street investors at Technology and Opportunity through our currently discounted offer here.

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