BYND Stock – The Story Around Beyond Meat (BYND) Just Changed
I have said several times here that as long as the Fed keeps adding liquidity to an already liquid system, what I call “story stocks” can be remarkably profitable for traders and investors. Money has to go somewhere, and stocks with obvious stories are an obvious choice. Even then, at some point, the story has to play out if the stock is ever going to see gains, and that is what is happening right now with one of the most storied stocks of all, Beyond Meat (BYND).
In case you haven’t heard the story here, Beyond Meat is a supplier of plant-based meat substitutes, and that is a rapidly growing, multi-billion dollar market. The potential is obvious, and the stock’s history reflects that. The IPO price back in May of 2019 was $25, and it was immediately clear that was a steal. The first trade in the stock that day was nearly double that at $46 and BYND never looked back. By July, it hit its high of just over $239.
Then reality set in:
As good as the story was, there were some potential problems. The market was getting crowded, with competitors large and small seemingly arriving every day, and at some point, every company has to turn potential into profit. High R&D costs were squeezing margins and profitability started to look a long way off for Beyond Meat. Clearly, at those levels the market had got ahead of itself. When the restaurants that were BYND’s primary customers were shut down in droves as the pandemic took hold in early 2020, the stock dipped below $50 for the first time since its debut. It recovered, but has lacked direction since then, exhibiting a worrying pattern of essentially sideways volatility.
During that time, however, a couple of facts about BYND emerged. They had great brand recognition and as a result, strong demand. They even announced deals to supply some major customers, such as McDonald’s and Yum Brands, the parent company of KFC and Taco Bell. The question that remained was whether or not they could satisfy all that demand and, more importantly, do so at a profit.
To some extent that question was answered this morning, when we heard that they are building a big manufacturing facility in China. That is a massive market for meat and, as consumers there become increasingly health conscious, is expected to be big for meat substitutes too. Having an end-to-end facility there will enable BYND to meet growing demand and reduce costs and could well prove to be the magic ingredient that allows them to start living up to their potential.
Of course, there is a chance that they won’t be able to do that for some reason. Maybe another competitor will gain market share at their expense, or a resurgence of Covid in China will make this move questionable at best, or plant-based meat alternatives will turn out to be a short-term fad, or any one of a number of other things could happen that change the story.
Right now, though, that doesn’t matter.
What matters is that the story around BYND has changed in a positive way. It has shifted from being what might be, and the risks involved in getting to that point, to what is actually happening. They have that great brand awareness and deals with massive chains and, as of this morning, a way of meeting that demand with reasonable costs. As a result, the focus can now return to what got traders and investors so excited a couple of years ago, the prospect of a fundamental societal shift away from animal products.
BYND popped on the story in pre-market trading but as I write, is giving back most of those gains. To me, that looks like an opportunity. This is the kind of story that can drive a stock a lot higher over time, and with the relative proximity of the support from the double bottom just above $113 available as a logical stop-loss level, BYND looks like a buy at these levels.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.