<p>It’s fun to speculate – as long as you win, that is. This is a principle that I try to keep in mind when I consider newer companies and stocks that nail hard on the IPO, only to fade and settle into a more realistic price range. It is always a compromise when we pass more established brands in favor of “exciting” stocks. And in fact, unlike a household name like McDonald’s (NYSE: MCD), there is little security or safety when investing in Beyond Meat (NASDAQ: BYND) stocks.
Still, the plant-based burger work has paid off so far because the BYND share has thanked more than 50% so far and famously secured a Canadian launch of the company’s burgers in McDonald’s restaurants. Whether the meat-free meat trend can continue to move forward can, however, be debated, as consumers’ tastes are frustratingly endless. I, for what it’s worth (not much, I must admit) expect the stock price to remain volatile when America and the world decide whether consumers really like plant-based foods.
Perception versus reality
Food marketing experts are well aware that from an economic perspective, it does not matter if a product is actually healthy or not. What really matters is whether consumers think it’s healthy. A recent survey of 1,000 adults conducted by Food Insight showed that “45% thought the plant alternative was healthier than animal meat, while 25% thought the plant alternative was unhealthier.”
What type of consumer is drawn to herbal foods? The above survey showed that the target demographic is upper class (“Those earning more than $ 120,000 were the most likely consumers (72%)”), relatively young (“those under 45 were the most likely consumers (62%)”), educated (“Those with a university degree (62%) were more likely consumers than those without a university degree (37%)”) and vegetarians (77%).
With herbal foods that appeal to younger consumers (who may be perceived as more willing to take risks), Beyond Meat may encounter difficulty gaining traction among the coveted demographic baby boomers. In an email to InvestorPlace, SophisticatedInvestor CMO Jack Choros explained how the perception of nutritional value alone may not be enough for the 55-year-old population:
The problem is that Beyond Meat contains a lot of sodium and is not completely healthy. Older consumers of their products know this, especially if weight or heart problems are challenges for them. On the flip side, demographics have lots of disposable income, which is always good for business. The question is, how will Beyond Meat handle both dynamics? Time will tell.
Priced for (Im) perfection
Choros has asked an excellent question and raised doubts about whether Beyond Meat can capture the trust of older consumers. As I see it, collaborating with McDonald’s – which most BYND stock traders probably see as a win-win – can actually damage Beyond Meat’s reputation because McDonald’s is not exactly known as a health food paradise.
Even with the stock price well below its $ 235-ish peak in July 2019, it is tempting to see the McDonald’s association already considered in the BYND stock price. InvestorPlace’s own Wayne Duggan said that Beyond Meat stocks are “priced for perfection” – a polite way of saying that all potential good news has already been priced in. I usually agree with this assessment.
Duggan expanded on this point of view with Piper Sandler’s analyst Michael Lavery’s good news, bad news missive: “We see a long growth path in the plant-based meat space, but we believe that Beyond’s valuation has already priced expected upwards from McDonald’s distribution. ”
Speaking as a truly effective theorist in the market, Mr. Lavery it. But his claim is true because Mickey-Dee’s hype can only carry the BYND stock price so far. If the other growth driver then is a millennial risk-taking behavior (ie their willingness to ignore the sodium and cholesterol content), I am fully convinced that the herbal hype can drive Beyond Meat stocks much further.
Takeaway at Beyond Meat Stock
Will the plant-based market for faux meat remain in hyper-growth mode, or is it just the taste of the month? No one – at least a humble economic writer with terrible eating habits – has the answer. However, with the tastes of young consumers being unclear and the potential of a McDonalds partnership already likely to be fully priced, I can assure you with certainty that Beyond Meat stock will not be on my plate.
David Moadel has provided compelling content – and crossed individual lines – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga and (of course) InvestorPlace.com. He also serves as chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Watching the Markets. At the time of writing, David Moadel had no position in any of the above securities.