What happened

Tattooed Chef (TTCF) stock is underperforming a falling market this week. The plant-based food specialist's shares were trading down by 10% for the week as of early Friday, according to data provided by S&P Global Market Intelligence, even as the wider market was off by about 2%. Tattooed Chef has had a rough 2022 overall, with shares down 59% year to date compared to a 17% decline in the S&P 500.

The latest slump was sparked by general concerns about economic growth, along with a few specific worries about the company's growth potential.

So what

The main factor driving Tattooed Chef's stock lower this week was the negative sentiment around growth stocks in general. The Nasdaq index, home to many of these investments, has slid by about 3% for the week due to investors' fears about rising interest rates and the possibility that the U.S. is entering a recession.

Investors have a few other reasons to be worried specifically about the short-term growth potential for Tattooed Chef. While the company recently won a broader distribution deal with Walmart (WMT 0.25%), interest in plant-based meat products appears to be waning somewhat. Beyond Meat, for example, has reported ballooning net losses in recent quarters as its sales growth has slowed.

Now what

Tattooed Chef hasn't seen the same type of pullback yet. In fact, its second-quarter sales were up 16% to $58 million. But its growth rate will likely slow over the next few quarters, and the company is still far from showing sustainably positive earnings.

While these factors could pressure the stock into late 2022, the wider investing thesis is intact. Tattooed Chef is building out its portfolio of products and winning more shelf space at key retailers. That success will translate into sales and earnings growth, assuming the company can maintain customer loyalty as more competitors enter the space.

These gains were easier to come by when the plant-based foods niche was expanding quickly, and today's weaker demand climate will likely shake some competitors out while lowering margins across the board. Given that tough short-term outlook, it makes sense that investors would become more cautious about Tattooed Chef stock.