Don’t get me wrong. I like Beyond Burgers. I like Beyond Sausage. In fact, my wife is a tad annoyed at packages of them stacking up in our freezer. Aside from the fact that they contain almost as much fat as their all-cow-counterparts, Beyond Meat products are really good for the planet and their long-term regenerative contribution to the food supply chain. But the stock? It’s beyond belief.
Million with an “M”
The company reported sales last year of just under $90 million. That’s million with an “m.” They went public in May at $25/share which valued the company at $1.5 billion. That’s billion with a “b.” But that’s just the beginning. Since the IPO, the company has unleashed a steady trickle of press releases announcing new customers such as Dunkin’ and Del Taco, new products such as fake chicken strips, and last week’s blockbuster: fake bacon.
The net result: today’s pre-earnings announcement stock price is about $221/share, giving the company a valuation of close to $14 billion. Just to put that in perspective, Conagra, the 100+ year-old Chicago-based food giant with $11 billion in revenue and brands such as Birds Eye, Orville Redenbacher’s Peter Pan, PAM, Hebrew National, Healthy Choice, and Egg Beaters is valued at $14 billion. CNBC recently pointed out that in its first two months of trading as a public company, Beyond Meat is now valued higher than 25% of the companies in the S+P 500.
An Age-old Story
Why? The short answer is this: speculation. Over the course of my 38-year Wall Street career, this movie has played before. In 1985, Teddy Ruxpin, the best-selling talking bear sent shares of Worlds of Wonder soaring to a valuation that far-exceeded the company’s asset value. When company insiders started unloading shares, investors got spooked. By 1988 the company was in bankruptcy and eventually liquidated. The examples of speculative tech companies in the late 1990s are too numerous to mention. But by 1999, if you bought shares of a tech company with a four-letter symbol that had anything to do with the internet, you probably made money in it…until you didn’t.
What is most troublesome about Beyond Meat is that, like most industries, when one company is successful, competition increases. This is not a technology or biomedical company with some unique intellectual property. It is a fake meat company, peddling a credible solution to the sustainability of our protein food chain. And while that’s admirable, it’s not something that dozens of other food companies couldn’t and won’t do.
If you want to preserve and grow your wealth, invest in a diversified portfolio of stocks and bonds. If you want to feel good about saving the planet from the industrial agricultural complex, eat a Beyond Burger, but the stock? It could be hazardous to your health.
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