Beyond Meat (NASDAQ:BYND) Still a Tasty Opportunity

It would be easy to look at the market as it sits right now and think that putting money on Beyond Meat (NASDAQ:BYND) is like mortgaging your house to buy Bitcoin at $19,000. The best opportunity is long gone, and anyone buying in now is buying at the top and getting ready for a drop. A closer look at the company's upcoming operations, however, suggests that that may not be true, and the factors that made Beyond Meat such a good buy a few months ago may about to repeat themselves even harder now.

Maybe It's Not So Tasty After All?

Having a bearish stance on Beyond Meat is beyond easy right now, and there's actually a pretty sound body of evidence on why you may want to short the company outright. Pessimists looking at investing here might well see a death trap waiting to happen and swallow up retirement money right along with it.

After all, the pessimist would say here, the factors that made Beyond Meat so attractive to begin with are about done. The stockyards are up and running now. The slaughterhouses are finally starting to catch up with their backlog, thanks to, among other things, the move to make these “essential businesses” by the Trump administration a few months back. Throw in vastly improved coronavirus protections and a lot fewer people are getting sick on the line.

That's sending prices at the grocery store and the butcher shop back on a downward path, and anyone who's bought a steak instead of putting it back and walking away sadly lately has likely seen that slow decline take place. This should, reasonably enough, send the demand for substitute goods down with it, and Beyond Meat is assuredly a substitute good for beef.

Throw in the incredible run of growth Beyond Meat had back in the second quarter—when the coronavirus was at its thickest and even drive-thrus were limiting their burger options—and that over 700% gain the company saw since going live at $25 a share back in 2019 may make it a prime target for shorting.

Of course, that's the same logic that's been burning Tesla (NASDAQ: TSLA) short-sellers for months now.

A Sudden Rush of Flavor

If what we'd described already were the complete picture, shorting Beyond Meat would be a no-brainer, the absolute perfect response to a company that's had a meteoric rise without the conditions that got it there to sustain said rise. It's a safe bet that Beyond Meat also saw this coming, because it's actually set itself up for even greater gains to come, and it's all thanks to China.

China has not only been suffering under the same coronavirus conditions as everyone else—their response, meanwhile, has been sufficient to make even Bill de Blasio look permissive by comparison, and he's suggested indoor dining won't return to New York City until sometime next year—but by some indications, it's been worse. They've been about two months or so ahead of everyone since they got it first, but China has had other problems to deal with that impact the food supply.

For anyone who's been following the commodities market, you already know that China has been on a whirlwind buying spree, picking up soybeans and pork and even corn and wheat on staggering scales. The explanation of this is rather simple when you consider how much of China's farmland is, at this moment, underwater right now. Massive flooding has swept the country—for a while the Three Gorges Dam itself looked like it might collapse—and it's a market that's buying food like it's going out of style.

The China Connection

The same circumstances that propelled the company to huge heights back in the second quarter look to be in play in parts of the third and fourth quarters as well, but even bigger. Beyond Meat is poised to release a viable meat substitute into a market that's very much interested in anything edible, and to that end, it's already started releasing its simulated meat to Starbucks locations in Asia. Right now, the Chinese impact is lighter than expected—markets like Hong Kong are in, so too are Taiwan, Thailand, Singapore and New Zealand—but it could expand to Shanghai or Beijing, potentially. Beyond Meat has had plans to hit China since April, at last report.

If Beyond Meat can make the kind of inroads necessary to sell to the Chinese, then it may have just the access point it needs to make its second-quarter results look flat by comparison. Certainly, competitors like Impossible Foods could step in in the meantime, but when it comes to the Chinese market, the question isn't so much “how many competitors are there?”, but rather “can everyone combined make enough product?”.