To eat this cheeseburger or to not eat this cheeseburger? That was a question many of us had the luxury of asking … at least before the coronavirus from China hit the U.S. and doomsday hoarders ravaged supermarkets. And that may have unveiled a problem for Beyond Meat (NASDAQ:BYND) stock.
After all, they took all the toilet paper, all the fresh food that would inevitably go bad in a matter of days anyway and almost all the meat, with the exception of a few slim pork bones here and there.
But they didn’t take many Beyond burgers … at least as far as I could tell.
That forces me ask a familiar question: Is Beyond Meat stock actually worth buying?
Lessons Learned on the Hunt for Meat
I was on a quest for meat last week and decided to check out Mom’s Organic Market — all the typical grocery stores were out of meat, so I figured maybe something more obscure wouldn’t have suffered the same fate. This place has protein powder made out of crickets for crying out loud! How could it be empty?
I was wrong.
Scrounging around the frozen food isle — the non-frozen meat section was barren — I stumbled upon a pack of Beyond Meat patties. I picked up the $10+ package and considered it for a moment. Four patties, right? That’ll last me a few days.
Then it dawned on me: the package had only two Beyond Meat patties.
You can buy a pound of fancy, organic ground beef for about $5, which would make you about four decently sized burgers. Thinking about it that way — Beyond Meat’s meatless alternative here is about twice the cost (sans a little more effort to make the patties yourself).
Instead of buying the over-priced patties, I set the package down and found 2lbs of frozen ground turkey in the same isle for a little over $10.
Of course, it’s likely that the cost here was higher than elsewhere (it’s the cricket protein powder place, after all). For example, on Target’s (NYSE:TGT) website, you can find a pound of the faux meat for $9. But relative to the real thing, it’s still about twice as much — if not more.
Beyond Meat Is a Luxury
The price of food was important before the coronavirus hit. But now — with many wondering whether they’ll still have a job next week — it matters even more. And I’m not the only one that this applies to: Many people are struggling to make the most meals out of the least possible food.
This has always been the case for many across the U.S., but the virus illuminates this reality even further.
That brings me to my core concern with Beyond Meat stock. Broadly speaking, its meatless solutions are a luxury.
Supposed sustainability factor or not, not everyone can afford to indulge in a beat-juice infused, pseudo-beef patty created in some sort of high tech lab. Unless you’re a vegan and/or have a greater ethical or dietary reason for avoiding meat, the current appeal of this luxury likely isn’t very high, given the current strain on the U.S. economy.
Of course, I think the meatless meat movement will not falter. Some analysts predict that the market will “reach $8.1 billion by 2026.” Maybe that projection will take a hit until coronavirus concerns fade, but that isn’t the main issue here anyway.
Beyond Meat isn’t the only brand out there offering tasty meat-free solutions. Nor are its offerings the cheapest.
Bullish investors will argue that Beyond Meat stock has name-brand recognition that should help propel it in the years ahead. It’s true — Beyond Meat has a recognizable brand and its faux meat is featured in some restaurants, and it has had some success in its trials at various fast food joints. But the same could be said about its key competitors like Impossible Foods.
Oh, and in case you didn’t know — not many people are dining out at a restaurant right now, feasting on a Beyond burger anyway.
Bottom Line on Beyond Meat Stock
The sage advice of legendary fund manager Peter Lynch is to “[i]nvest in what you know.” But even he acknowledges that investing decisions are never that simple. You need to do some research before going all in. You can’t just eat a Beyond burger, think it tastes great and become bullish on the stock.
When it comes to Beyond Meat stock, I recognize a few things that make me want to avoid it despite the inevitable growth in the alternative meat space:
- Much of the hype surrounding the stock is based in its potential to land big-time deals with fast food restaurants. It doesn’t really have an established deal in place yet with McDonald’s (NYSE:MCD) or Yum! Brands’ (NYSE:YUM) KFC, despite its products enjoying trial phases there.
- While more people are adopting meatless meat, its retail consumption is not as significant as you might think. InvestorPlace contributor Josh Enomoto points out that of those who purchased alternative meat last year, “each person bought [about] $12.49 worth of fake meat. That’s the equivalent of buying Beyond Meat’s two-pack four-ounce patties twice.” While the nitty-gritty of these numbers is more nuanced, the core idea that fake meat isn’t yet widely adopted by consumers still stands.
- According to Motely Fool analyst Jon Quast, “In 2019, Beyond Meat’s restaurant sales nearly quadrupled and made up 51% of total revenue.” It doesn’t take an expert to recognize that this number will likely take a massive hit amid the aftermath of the coronavirus.
The list could probably go on for a few more bullet points, but I think that alone is enough to justify my skepticism toward Beyond Meat stock. This is especially true when you add in its products’ “luxury” status in much less luxurious times.
Until there’s a clear and absolute necessity for buying its expensive products, especially in these more difficult times, I wouldn’t count on it being widely successful for quite some time — both in grocery stores and in restaurants.
Robert Waldo has been a web editor for InvestorPlace since 2016. As of this writing, he did not hold a position in any of the aforementioned securities.