Beyond Meat's Valuation Is Beyond Belief - Years Of Growth Already Incorporated Into Share Price

Sep. 18, 2019 8:17 AM ETBeyond Meat, Inc. (BYND)18 Comments

Summary

  • Since the IPO in May, Beyond Meat shares have gained 137%.
  • The plant-based meat industry will grow exponentially over the next decade.
  • The competition in the industry might intensify as leading food processing companies identify the opportunity.
  • Shares are overvalued. High volatility creates trading opportunities for options traders.

Investment thesis

Beyond Meat’s IPO on May 2 was one of the most anticipated IPOs so far this year. Since going public, Beyond Meat shares (NASDAQ:BYND) have gained a staggering 137%. This performance can be directly attributed to the attractive prospects of the clean meat industry. There are a few tailwinds behind the clean meat industry in the U.S., and other major regions including Australia are picking up the trend. One such tailwind is the exponential growth of the global population. The World Bank expects the global population to reach 11.2 billion in 2100, growing at a steady rate from the current population of 7.4 billion people. It is questionable how the demand for meat can be met for such a large addition of population globally. The growing environmental, health and ethical concerns are also proving to be a tailwind for plant-based meat manufacturers including Beyond Meat.

Despite the attractive prospects of the clean meat industry and the plant-based meat industry, Beyond Meat is still trying to break through to profitability and the current valuation does not reflect the true and fair state of the company. What is more noticeable is the volatility of BYND shares. I believe the time is not right to invest in BYND shares, but an earnings beat in the next quarter could momentarily pop the share price up as well, the same way it did when the company reported Q2 earnings. The significant volatility of BYND shares creates opportunities for options traders.

Company overview & business strategy

Beyond Meat develops a portfolio of plant-based meat items. At present, the company has successfully developed 3 core plant-based meat production platforms including beef, pork, and poultry. The flagship product of the company is the Beyond Burger, which gained widespread media attention leading up to its IPO. This burger is designed and developed to look, taste, and

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