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Why Beyond Meat Shares Were Slumping Today

By Jeremy Bowman – Aug 15, 2019 at 11:56AM

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Shares of the plant-based meat substitute were sliding again, though there was little news out on the company. Here are some possible explanations.

What happened

Shares of Beyond Meat (BYND -1.80%) were falling today as investor optimism seemed to be fading around the high-flying alternative meat stock. Though there was no company-specific news out on Beyond Meat today, a variety of factors seem to have contributed to the sell-off, including the stock's lasting volatility since its IPO in late April.

Shares were down 10% as of 10:57 a.m. EDT.

A selection of Beyond Meat products.

Image source: Beyond Meat.

So what

One hidden factor that may be contributing to Beyond Meat's slide today is yesterday's filing by WeWork parent The We Company to go public. 2019 has already been a bumper year for IPOs, likely the biggest since the dot-com era, with debuts including Uber, Lyft, Pinterest, and Beyond Meat. WeWork, at a valuation of $47 billion, would be the second-biggest of the year behind Uber and one of the biggest of the decade, though the office-sharing company hasn't priced its offering yet.

With WeWork's IPO coming down the pike, IPO investors who struck it big with the plant-based meat company might be preparing some "dry powder," considering that Beyond Meat stock has surged by nearly 700%, even with today's slide. Those investors now have plenty of money to pour into the next big public offering.

Alternatively, investors could be sensing a bubble in the IPO market after several new stocks have surged this year, including Zoom Video, ShockWave Medical, Pinterest, and Beyond Meat. Despite the office-rental company's skyrocketing growth, there's plenty of skepticism surrounding the WeWork IPO.

The sell-off might also just be a continuation of a pattern that began after Beyond Meat stock reached an all-time high of $239.91 on July 26 but fell nearly 40% after the company announced a secondary offering along with its second-quarter earnings report on July 29. The move was mostly to give existing shareholders an opportunity to cash out rather than to fund expanding operations.

Now what

Despite the decline in recent weeks, Beyond Meat stock remains dearly valued at a price-to-sales ratio of close to 40 based on this year's expected revenue. This valuation puts it in a league with start-up biotech stocks and some high-priced cloud stocks. Media coverage continues to be overwhelmingly positive for Beyond Meat and its rival Impossible Foods, indicating that the outstanding growth they've seen lately should continue at least for the immediate future, but the valuation concerns aren't going away anytime soon.

Beyond Meat's share price will be tested again in late October when its IPO lockup period expires, allowing insiders and early investors to sell their shares for the first time. We could see a sharp drop in the price then, if not sooner, as this high-flying stock might finally return to earth.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Zoom Video Communications. The Motley Fool owns shares of Pinterest. The Motley Fool recommends ShockWave Medical and Uber Technologies. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Beyond Meat Stock Quote
Beyond Meat
BYND
$14.17 (-1.80%) $0.26
Uber Technologies, Inc. Stock Quote
Uber Technologies, Inc.
UBER
$26.50 (0.30%) $0.08
Lyft, Inc. Stock Quote
Lyft, Inc.
LYFT
$13.17 (-2.30%) $0.31
Zoom Video Communications Stock Quote
Zoom Video Communications
ZM
$73.59 (-1.18%) $0.88
Pinterest Stock Quote
Pinterest
PINS
$23.30 (0.47%) $0.11
ShockWave Medical Stock Quote
ShockWave Medical
SWAV
$278.07 (0.81%) $2.23

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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