Beyond Meat (NASDAQ: BYND) stock has struggled over the past few months, falling from highs of $192 to its current price of $108. This has mainly been the result of fears about rising competition and lacklustre results. Nonetheless, I have used this recent dip as the perfect opportunity to add Beyond Meat to my portfolio. Here’s why.
Recent trading update
The recent trading update was poorer than many had expected, with the company posting a net loss of $27.3 million. Although revenues rose 11.4% year-on-year, this was also lower than analyst’s expectations. All in all, this fairly substandard trading update caused Beyond Meat stock to fall 6% on the day.
Nonetheless, I saw this dip as an opportunity to buy. Indeed, when analysing where the loss came from, a lot of it was attributable to the development of the company, which includes international and product development. This has included the launch of many new and improved products. I am hopeful that this will pay off in the long term, leading to increased revenues and healthy profits.
The trading update also pointed to Covid-19 pressure on the foodservice business, mainly due to a lack of restaurant customers. With normality starting to resume around much of the world, I feel that this is a short-term problem. As such, I am hopeful that the next trading update will be much brighter, and that there is significant upside potential for Beyond Meat stock.
Other considerations
Yet I still have concerns about Beyond Meat, such as the rising competition within the meat substitute market. Indeed, one of its rivals, Impossible Foods, has been cutting prices recently. This has helped it gain market share at the expense of Beyond Meat. Traditional meat companies such as Tyson have also introduced their own meat-free alternatives. Such competition can strain profit margins, which is a problem for Beyond Meat as it may also have to lower prices.
Nonetheless, although this is one of my main worries, it has not deterred me from buying Beyond Meat stock. In fact, such competition simply demonstrates that the plant-based protein market is extremely healthy. This market should continue growing as consumers become more environmentally and health-conscious. As shown by the strong IPO from Oatly yesterday, investors are interested in companies that offer alternatives to traditional animal products.
While there may be increased competition, it does seem that Beyond Meat is still a market leader. Indeed, according to the latest SPINS and NPD data, Beyond Meat is the number one selling plant-based meat brand in the refrigerated category at US grocery stores and across US total foodservice. The company is also increasing its international presence, especially with a larger focus on Europe. As such, I believe that Beyond Meat stock is in a strong position to make large gains over the next few years. This is the reason why I have recently bought the stock.
