Why Is Beyond Meat Stock Dropping Despite Vegan Trend Growth?

Beyond Meat (NASDAQ:BYND) was one of the original companies to offer a popular, well-liked vegan alternative to meat products.

Served widely at restaurants, Beyond Meat became one of the first large brands to gain recognition as a viable meat alternative. In 2019, this fact and the growing interest in vegan diets led the stock to reach a record high of nearly $235 per share.

Fast forward five years and the vegan diet remains a popular choice for people looking to improve their health or reduce their environmental footprints. But BYND share price has all but plummeted into the basement.

Shares now trade at less than $7 per share, and analysts believe that the stock still has room to fall. Why has Beyond Meat struggled as veganism has taken hold, and what does the future hold for this embattled company?

The Popularity of Veganism Has Exploded

To say that the last two decades have been a period of explosive growth for veganism would be an understatement. Between 2004 and 2019, estimates suggest that the number of vegans in the United States multiplied by about 30.

This number doesn’t even fully capture the growth of potential customers for alternative proteins like Beyond Meat, as vegetarians and others looking to reduce their meat consumption may choose such products without following a strictly vegan diet.

Furthermore, veganism doesn’t seem to have capped out. By 2030, the market for vegan foodstuffs is expected to grow to $162 billion. About 40 percent of Americans surveyed also express an interest in eating less red meat, a fact that could keep the vegan diet in the forefront of consumers’ minds for several years to come.

Why Is Beyond Meat Stock Dropping?

Beyond Meat has suffered from declining revenues, even at a time when veganism has been growing in popularity, causing the share price to drop.

Full-year revenues peaked in 2022 when the company was able to generate $419 million in sales. The current trailing 12-month total is $318 million, representing a huge drop from peak revenues. This decline in sales has set in as a prolonged trend, as each of the last nine quarters has seen revenue shrinking on a year-over-year basis.

Beyond Meat’s deteriorating sales have been accompanied by large losses. The company briefly achieved profitability for a few quarters in 2019, but since then losses have grown to a current trailing 12-month total of $313 million.

Given that revenues for the same period were $318 million, Beyond Meat is losing almost as much as it brings in at this point.

Why Has Beyond Meat Struggled So Much?

Behind the raw numbers that have driven BYND’s share prices down so much are several fundamental factors. To begin with, the alternative meat market is much more competitive than it was when Beyond Meat first appeared on the scene.

With over a dozen major plant-based meat companies now offering everything from vegan chicken to fish, consumers today have a much wider range of products to choose from. Beyond Meat, meanwhile, hasn’t been able to maintain its moat and so has seen sales shift away from it over the last couple of years.

Another major problem for the alternative meat market at large is the fact that prices have remained far above comparable real meat products. Despite years of innovation and an increase in market scale, alternative beef still costs about one-third more than real beef. With grocery prices already straining family budgets in recent years due to high inflation rates, it’s little wonder that an alternative meat company like Beyond Meat has struggled to increase or maintain its sales.

The cost factor has led many consumers to pursue vegan diets without necessarily buying meat replacements. Many consumers have simply stopped adding meat to meat dishes or opted for entirely different meals that don’t rely on meat ingredients. This cheaper approach to veganism has, of course, worked against the alternative meat industry.

Is There Value in BYND?

After its large selloff, many investors may be tempted to look at BYND as a potential value buy. The stock, after all, trades at just 1.4 times sales while the company still holds nearly $145 million in cash and equivalents. Furthermore, the company’s 3.8 current ratio shows that it has much more in short-term assets than in short-term liabilities.

On a longer time horizon, though, things begin to look much more difficult. Beyond Meat’s long-term liabilities total about $1.22 billion, the vast majority of which is held in senior convertible notes.

As a result of this large long-term liability, BYND has a book value of -$7.95 per share. Given that the company doesn’t seem to have much momentum for a turnaround, it’s unlikely the stock will make up lost ground anytime soon.

Beyond Meat’s analyst outlook is also quite bleak. Analysts currently give the stock a 12-month median price forecast of $5 per share, meaning that the stock has the potential to slip by another 27 percent over the next year. Even the highest forecast gives BYND a projected price of $7, barely above the current price of $6.86.

Is BYND a Buy, Sell or Hold?

At the moment, Beyond Meat appears to be in a very difficult position. With sales slipping, losses that equal nearly 100 percent of revenue and a large amount of long-term debt, Beyond Meat faces both fundamental and financial challenges.

With a market that is increasingly less conducive to the company’s growth, the odds are bleak that Beyond Meat will be able to overcome these challenges in the near future.

Given these factors, BYND may be a candidate to sell at the moment. Upward tailwinds from lower interest rates may keep the broader market moving in a bullish direction, creating a potentially large opportunity cost if BYND shares do continue to lose value. All things considered, the risks of holding Beyond Meat at the moment may outweigh the stock’s potential to rebound and produce positive returns.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.