Stock Analysis & Ideas

Beyond Meat: A Stock Whose Catalyst May Have Arrived

Story Highlights

Full of early promise, shares of plant-based protein company Beyond Meat have utterly cratered this year. Nevertheless, a potential hurricane of incoming food supply-chain woes may be the cynical catalyst BYND stock has been looking for.

Thanks to burgeoning progressivism in international politics and the Internet’s vast reach, an increasing number of consumers are becoming aware of the environmental footprint they collectively impose. Indeed, McKinsey & Company discovered that a sizable share of consumers would pay a small premium to exercise sustainability, a dynamic that bolsters Beyond Meat (BYND), a plant-based meat manufacturer. As speculation, I am bullish on BYND stock.

For proponents of the “fake meat” industry, the segment caters to three major concerns. First and foremost, companies like Beyond Meat offer significant health implications. According to Scripps Health, eating too much red meat could be deleterious to one’s wellbeing. Research indicates that regularly consuming red and processed animal proteins can raise the risk of type 2 diabetes, coronary heart disease, stroke, and certain cancers.

Second, BYND stock aligns with the current movement supporting environmental sustainability. According to information provided by the University of California, Davis, a single cow will belch around 220 pounds of methane every year.

Combine this figure with the necessary production output to meet the demand of a global population projected to hit nearly 10 billion by 2050, and the overall framework could be unsustainable for the planet.

Third, Beyond Meat and its competitors offer an alternative cog in the broader food supply chain. Just like utility firms may have the option to switch from natural gas to coal to generate electricity, BYND stock essentially represents additional avenues for the increasingly strained food resource infrastructure.

It’s the latter point that may drive BYND higher after suffering horrendous losses over the trailing year.

Beyond Meat Stock Analysis

On TipRanks, BYND scores a 3 out of 10 on the Smart Score spectrum. This indicates moderate potential for the stock to underperform the broader market.

An Industry in Crisis

In the cherished writings of the Ketuvim (also known as the Book of Proverbs), the author states, “Wealth gotten by vanity shall be diminished, but he who gathers by hand will increase.” A universal teaching, the lesson is that slow and steady wins the race.

Interestingly, the inverse of this lesson is also true: gradual indolence can lead to devastating longer-term consequences. Tragically, the writing may be on the wall for the food industry unless a solution can be found quickly.

Late last year, the U.S. Department of Agriculture revealed that the percentage of farms that are small and family-owned remains steady, but they are producing less. Not surprisingly, they have also become financially riskier, a consequence in part of the COVID-19 pandemic.

To be fair, big corporations are swallowing up their smaller competitors, which, on the surface, doesn’t seem to affect the total net picture of food production. However, Columbia Climate School recently warned that droughts simultaneously occurring in different regions internationally could jeopardize global food security. Essentially, small neglectful actions taken over many years finally resulted in an unignorably negative outcome.

It may be unrealistic to present Beyond Meat – and by deduction, BYND stock – as a panacea to the myriad challenges facing global food infrastructures. Still, research shows that plant-based meat uses 72% to 99% less water than the processes involved in conventional meat production.

With water shortages potentially sparking the next great human conflict, anything that society can do to reduce water usage is a net positive.

BYND Stock and the Christmas Tree Problem

A few months ago, in February, the U.S. Department of Agriculture reported that the total number of cattle and calves on farms and in feedlots was estimated at 91.9 million head. Stated another way, the U.S. cattle herd shrank by 2% last year.

Ordinarily, this statistic might not sound like much. However, it’s important to realize that back in 1982, U.S. cattle inventory totaled roughly 116 million head. By 1990, this metric dipped to around 97 million head before gradually rising higher. Still, the increase was temporary. Since 1996, the cattle inventory has been largely declining.

Should you plot this inventory count on a logarithmic basis, you will notice that the steepest decline occurred in the 1980s. Subsequent years since 1996 have featured steady inventory erosion. Mathematically, then, the trajectory roughly resembles exponential decay, a worrying concept for food security.

Unfortunately, the matter is not receiving the attention it deserves on mainstream media platforms because consumers at large don’t see the food disruption. This circumstance is akin to the Christmas tree problem.

In short, a full-growth cycle for a Christmas tree takes more than a decade, which explains why consumers only noticed shortages recently. No one noticed the disruption in the seeding process during the Great Recession.

Likewise, it takes about three years or so to raise cattle for slaughter. In other words, whatever mitigatory decisions that farmers made in response to the COVID-19 crisis will fully materialize in the months ahead.

Wall Street’s Take

Turning to Wall Street, BYND stock is a Moderate Sell based on zero Buys, seven Holds, and four Sell ratings. The average Beyond Meat price target is $27, implying 13.5% upside potential.

Beyond Time

Few will argue that Beyond Meat or the wider plant-based meat industry is the comprehensive answer to the vexing food supply dilemma. While sector players may use fewer critical resources, they are not exempt from consumption and, therefore, environmental impacts. As well, many of the challenges disrupting traditional food suppliers will likely hurt BYND stock.

Still, Beyond Meat can act as a blowoff valve, relieving some pressure as a much-needed alternative food source. Based on all the evidence, a food crisis is almost inevitable. Consumers don’t see it yet because the seeds of sorrow were only planted two years ago, but soon, the barrenness will reach maturity, forcing everyone to take notice.

At that point, Beyond Meat’s time will have truly arrived.


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