Red Flags: Beyond Meat (BYND) Slides After Pricing Secondary Offering

Beyond Meat (BYND) may have just spooked investors.

All after the company priced a secondary offering at $160 a share.  The company said it wants to raise $40 million to expand its manufacturing to keep pace with product demand.  

After all, it could use the money.  Even though sales are soaring as consumers turn to meat substitutes, it’s losing money.  Revenues hit $67.3 million in the second quarter, up from $17.4 million year over year. However, the company did lose $9.4 million during the last quarter, more than the $7.4 million it posted a year earlier.  

At the same time, valuation seems to be a concern.

Bernstein analysts note the firm is “on the sidelines as valuation appears stretched,” as quoted by Fortune, “implying limited upside potential from a valuation perspective.” The firm also wonders if Beyond “can continue to deliver positive news that surprises to the upside.”

The stock also trades at 65x sales, and 33x book value.

The other concern is that BYND is facing big headwinds from competition.  

Tyson Foods is entering the meatless market through its new brand, Raised & Rooted.  Nestle is launching a plant-based burger in Fall 2019 with its Awesome Burger being made available at grocery stores, restaurants, and schools. Burger King just rolled out its Impossible Whopper.  McDonald’s is selling veggie burgers in Germany.  

Now, the Impossible Burger, which was only available in restaurants could be making its way to U.S. grocery store shelves, too. Plus, the U.S. FDA just amended its rules to call the use of soy  leghemoglobin safe as a color additive in imitation beef, clearing a key hurdle in the company’s push to sell raw product inside grocery stores, as reported by Bloomberg.   The company also signed an agreement with global food producer, OSI Group to expand production.  

That increased competition coupled with a stretched valuation could be a warning sign.