Although the S&P 500 and Nasdaq have recovered by 1.05% and 1.55% today, Beyond Meat stock (BYND) was down 9.6% this morning. Dunkin Brands (DNKN) had fallen 2.7%. A few days ago, Dunkin announced a partnership with Beyond Meat.
Time to look beyond?
Beyond Meat has had a fabulous run on the Nasdaq since it went public in May. The stock had this year’s best IPO so far, gaining 163% on its debut day. Beyond Meat stock continued its dream run in June and most of July, gaining 54% and 22.3%, respectively. Even after its recent sell-off, the stock is trading at seven times its IPO price.
However, madness for the stock may be fading. On July 30, the stock fell 12.3% after the company missed analysts’ Q2 earnings estimate.
Yesterday, BYND announced pricing for a secondary public offering just three months after its IPO. The company priced the secondary offering at $160 per share, 19% below yesterday’s closing price. The company is expecting to raise $40 million through the offering to ramp up production, boost its working capital, and pay for marketing. BYND shares are still trading above their secondary offering price, but more stress might be on the way.
Beyond Meat’s valuation
The bigger worry for investors may be BYND valuation. Last month, JPMorgan Chase downgraded BYND due to its sky-high valuation. BYND’s current valuation of $10.7 billion is almost 40 times its Q2 revenue run rate of $269 million. In comparison, Amazon (AMZN), the flagbearer of fast growth, is trading at a revenue multiple of 3.7x. To justify its premium valuation, Beyond Meat will have to grow faster than most companies, and for a longer time.
Another issue is Beyond Meat’s losses. While investors are happy to invest in the company’s growth story, it needs to prove it can turn profitable and boost profits substantially to justify its premium valuation.
Finally, as the plant-based meat market grows, more players are bound to join—bringing prices down and marketing costs up. This shift is already starting with Canadian and British vegan “meat” makers announcing US market forays. Beyond Meat stock could be headed for a fall.