Beyond Meat (NASDAQ: BYND) Fizzling on the Grill?

For a while there, Beyond Meat (NASDAQ:BYND) was looking like the meatless alternative to beat. It was making substantial expansions, it was showing up in some major restaurant—inasmuch as “McDonald's” (NYSE:MCD) can be called a “restaurant”, anyway—and its stock price was on a tear. Recent moves, however, have some wondering if there's uncooked meat under those authentic-looking char marks, and recent reversals have suggested there may be problems ahead.

The Flash in the Pan

Those who sold off Beyond Meat stock back in July of 2019 are currently laughing all the way to the bank. Once it hit that high-water mark, closing at $234.90 a share, the company almost immediately began a race to the bottom. And by “bottom”, I mean “losing almost 75% of its value.” After the massive 2019 drop, Beyond Meat quickly settled into its new level, trading fairly reliably between $74 and $84 per share.

Just after the new year kicked in, the company got a nice boost, letting it get all the way to nearly $130 a share before trading in a much more volatile range. That was when March hit, and the Massive Indiscriminate Coronavirus Sales Event kicked in, leading investors to sell almost everything that wasn't nailed down, and a few things that were.

However, there was a distinct advantage out of the coronavirus that led to the company's value roughly tripling from its March lows: the coronavirus turned out to impact almost every part of life, from retail to farming. Farmers found it increasingly difficult to get beef to market to be slaughtered and turned into steaks and burgers and everything else, so meat prices to the consumer soared even as meat prices to the farmer collapsed.  That was when Beyond Meat's new heyday began, as consumers looking for a cheaper alternative decided that maybe this Beyond Meat stuff was worth a shot.

The Sizzle and the (Meatless) Steak

So there was Beyond Meat, looking for all the world like a comeback story worth talking about until a string of reversals kicked in. Only recently, Barclays pulled a truly unexpected move: a two-step downgrade from internal analysts. Rated “overweight” just days ago, the company now holds a rating of “underweight” at Barclays. Cited reasons? “Short- to medium-term headwinds” as the company faces some fairly difficult environments going forward.

Barclays noted that Beyond Meat's marketing plan was focusing pretty heavily on foodservice businesses, to the point where restaurants and the like were accounting for about half of all of Beyond Meat's sales. A reasonable enough plan even just last year, but after the coronavirus stepped in, restaurants were hit hard. With Barclays suggesting a full recovery may still be at least six months away to “sometime in 2021”, that's a sock in the marketing plan that could have serious impact on the bottom line.

An Increasingly Unappetizing Option

That's bad enough, but Beyond Meat is working against quite a few other headwinds besides. First, while meat processing plants were still turning out to be coronavirus havens par excellence, they were also declared “essential businesses”, and particular focus was put on protecting workers therein. That got the gears going again on at least some level, and while supply is still volatile to this day, it's certainly off its lows. With regular meat coming back to stores, at prices that aren't too far off normal, consumers are questioning the need or inclination toward meatless alternatives.

Second, the foodservice operations aren't exactly going that well either. A recent test for Beyond Meat in Canadian McDonald's branches concluded back in April, and results are being kept extremely quiet. At one point, all McDonald's would say was that a test had been staged, and it was concluded. That has to hit like an anvil dropped from low Earth orbit; if the test had been a success, McDonald's would have made as much abundantly clear, telling anyone who'd listen about the great new alternative at McDonald's locations.

Finally, there's the matter of competition. Beyond Meat isn't the only firm in this space. Impossible Foods' line of meatless alternatives has been pursuing a similar market strategy to Beyond Meat, and its version seems to be coming out much better. It's recently been added to Burger King's (NYSE:QSR) breakfast lineup, and even more recently, to Starbucks' (NASDAQ:SBUX) with some high-end accouterments. Some other moves for Beyond Meat look to help, like the newly-released $50 summer cookout kit, but it's still going to be hard-pressed to compete against the consumer favorite: actual meat.

Take all of this together, and it adds up to a pretty unpleasant picture for Beyond Meat. Its focus on restaurants is coming back to haunt it, the competition is starting to grow, and one of the biggest reasons to even entertain the notion of meatless meat—the expense—is starting to fade away. That's not a dish to bite into, and it's making Beyond Meat stock look unappetizing to all but connoisseurs.