Over the past few years, consumers have become more health conscious, prompting them to explore plant-based alternatives for red meat.

Due to this, Beyond Meat (BYND), a manufacturer of plant-based meat seems to be well-positioned to capitalize. However, beneath this veneer lies an unprofitable company.

Since going public in 2019, the company has yet to generate positive returns. Yet last week, it saw its returns surge by as much as 450%.

As it turns out, this run was fueled by meme stock investors acting on a Reddit post that was bullish on Beyond Meat.

However, it seems the company’s recent run is about to come to an end as investors realize how deeply unprofitable it is.

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Today it is easier than ever to be a vegetarian, vegan, pescatarian, or follow any number of specialized dietary programs.

Meat alternatives are becoming increasingly prevalent around the globe, presenting an opportunity for companies to capitalize on a relatively new but quickly growing market.

At least, that’s the thesis for the existence of plant-based meat alternative producer Beyond Meat (BYND).

As consumers turn toward healthier alternatives, Beyond Meat seemingly appears to be well-positioned. In fact, it saw its valuation soar above $10 billion when it went public in 2019 due to enthusiasm over meat alternatives and the possibility of inking deals with restaurant and supermarket chains.

Unfortunately, the company has struggled for years to convince more customers to ditch red meat for its plant-based patties.

Yet despite this, the California-based manufacturer saw its stock surge 450% last week following an announcement that Walmart would expand the distribution of its product at more than 2,000 locations.

This surge in share price came as a surprise as prior to the Walmart announcement, Beyond Meat’s stock fell below $1 after announcing the results of its debt-swap deal which led to the reduction of its debt load by around $800 billion at the expense of diluting equity investors through the issuance of new shares.

As it turns out, this rebound was driven by meme stock investors who acted on a Reddit post that was bullish on Beyond Meat. Due to investors acting on the hype, the company’s stock surged and was even added to Roundhill Investments’ meme stock ETF. At its height, Beyond Meat’s stock traded at more than $3.60 this month.

However, it seems the company’s recent run is about to come to an end as the hype is fading in the face of yet another disappointing quarter.

In its preliminary third quarter results released at the end of last week, Beyond Meat announced forecasted revenues of roughly $70 million, slightly beating analyst expectations and in line with guidance. However, this forecasted revenue is a 13% year-over-year decline, showing that the company is still grappling with weak demand for its product.

At this point, Beyond Meat’s stock has fallen back below $2, and some analysts expect the slide to continue.

Beyond Meat’s annual sales have steadily declined since 2021, falling from $464 million to just $326 million last year. Even though there’s demand for meat alternatives, the company’s premium price point is pushing customers away, especially as inflation has made food items more expensive.

Demand for the company is faltering, making Beyond Meat’s pursuit of profitability appear far-fetched.

Since 2019, the company has consistently generated negative Uniform return on assets (“ROA”), which have fallen from -5% levels to -22% in 2024.

Beyond Meat’s failure to generate profits can only be ignored for so long, even among meme traders.

Despite the recent rise in its stock price, this is still a struggling business, and Beyond Meat’s subsequent stock collapse in recent days reflects the market’s return to reality.

Considering the extreme volatility in its stock, investors should steer clear of this company.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Officer &
Director of Research
at Valens Research