A (un)real meat market

06/14/19
  • On Monday, Beyond Meat’s (BYND) post-IPO gain was more than 300%
  • Stock pulled back sharply Tuesday after JPM downgrade
  • Tyson (TSN) enters the meat substitute market

In a year chock-full of IPOs, Beyond Meat (BYND) has set itself apart from the pack—mainly by nearly quadrupling since May 2, while some of its higher-profile compatriots have struggled to get back to breakeven.

By June 6, barely five weeks into its trading life, BYND had more than doubled from its IPO-day opening price of $46, but the following chart shows that was just a warm-up for the next four days, when the stock jumped 41%, another 21%, then dropped -25%, then bounced back 12.5%:

Beyond Meat (BYND), 5/2/19–6/13/19. Beyond Meat (BYND) price chart. Wild ride.

Source: Power E*TRADE


At its high tick on Monday ($186.43), BYND was up around 305% from its initial trade price.

The Tuesday retracement came amid a downgrade (overweight to neutral) from J.P. Morgan—one of the underwriters of Beyond’s IPO—on the basis that the stock had overshot its price target, which the firm pegged at $121.1

Which perhaps makes Wednesday’s 12.5% rebound all the more remarkable.

For a moment, let’s forget about the long-term outlook for the “faux meat” market BYND is seeking to expand, or the debated nutritional benefits of these products, or the fact that they’re currently more expensive than the animal products they’re trying to replace.2 The market will evolve, and these things tend to work themselves out in the wash, one way or the other.

Let’s instead look at BYND's price dynamics, along with the recent news that another company—one you may have heard of—has gotten into the plant-based protein biz.

Tyson (TSN), the country’s biggest meat processor, just unveiled its own meat-substitute line, called Raised & Rooted, which, like Beyond Meat, uses pea protein as its base.3 (Interesting side note: Tyson sold a 6.5% stake in Beyond Meat in April.4)

TSN, which is up 54% on the year, jumped nearly 3% in early trading yesterday—just missing its December 2017 all-time high of $84.65 (see monthly chart inset)—before pulling back to a much more modest gain:

Tyson (TSN), 11/28/18–6/13/19. Tyson (TSN) price chart. Near record high.

Source: Power E*TRADE


Although TSN’s announcement doesn’t mean BYND (or Impossible Foods, another faux-meat producer) has just been chased out of the neighborhood by a bigger dog, it does highlight the fact that this industry is in its embryonic phase, and there likely will be other pea-protein-based hats tossed in the ring before all is said and done. BYND currently may have most of the publicity, but they’re not the only game in town.

But in a new market with few players, investors can sometimes get awfully excited about a particular stock, and then get awfully unenthused about it. Check out a 2018–2019 chart of Canadian cannabis company Tilray (TLRY), for example. A lot of early short sellers may have gotten squeezed in the rally, but longs took equal punishment on the way down.

All of which may have been a factor in J.P. Morgan’s Tuesday announcement, and the fact that currently no analysts monitored by TipRanks currently have a buy rating on BYND.5

Meanwhile, some traders will likely be watching TSN to see if yesterday’s high turns out to be a significant resistance level, or if the stock is gathering strength before attempting a run at new records.

Long term investors can, and should, be patient. Short-term traders can’t always be patient, but they can be selective.

Today’s numbers (all times ET): Retail Sales (8:30 a.m.), Industrial Production (9:15 a.m.), Business Inventories (10 a.m.), Consumer Sentiment (10 a.m.).

Today’s IPOs include: Chewy (CHWY).

 

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1 Fortune. 'Purely a Valuation Call': Why J.P. Morgan Just Downgraded Beyond Meat. 6/11/19.

2 MarketWatch. Meatless fast-food burgers probably aren’t any healthier — and they’re definitely more expensive. 6/13/19.

3 The Verge. Tyson Foods is getting into the fake meat business. 6/13/19.

4 Reuters. Tyson sells stake in plant-based meat maker Beyond Meat. 4/23/19.

5 TipRanks. BYND Beyond Meat. 6/13/19.

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