Shares of Beyond Meat have fallen 40% from their 52-week high.
This month, shares of Beyond Meat hit their first big slump since the company’s May IPO. The stock dropped from its 52-week high of $239.71 per share and fell as low as $144 per share.
This was mostly due to the company’s second-quarter losses and a secondary stock offering that rattled investors. But on Tuesday, Beyond Meat’s shares were up more than 6% after the company was upgraded by JP Morgan Chase.
Analyst Ken Goldman upgraded the company from neutral to overweight and raised its price target to $189 per share. In a note to clients, Goldman outlined his reasoning for upgrading the company.
The biggest reason? The fact that the stock is down 40% since July.
3 Things Going Well for Beyond Meat
JP Morgan downgraded shares of Beyond Meat in June due to its high valuation. So the upgrade was something of an about-face for the company.
Goldman said that the company’s reasonable valuation, market potential, and strong data tracking were his primary reasons for the upgrade and made the stock “appealing once again.” He was largely dismissive of the second stock offering that rattled investors.
Most things have gone right for Beyond Meat since its public offering, especially considering that the company isn’t yet profitable. Here are three reasons Beyond Meat is still worth investing in.
Positive growth drivers
One of the biggest reasons for Beyond Meat’s strong start is its partnerships with restaurants. National food chains continue to pick up the company’s meatless products. During the second quarter, the company’s restaurant sales came to $33 million, up from $5.7 million just a year earlier. A year ago, the company’s retail revenue was far outweighing its revenue from restaurants. Now, these two figures are pretty evenly matched.
Improved products
The company recently upgraded its main product, the Beyond Burger. The new burger is has a meatier texture and is available in supermarkets across the country. And the company is taking steps to improve its manufacturing process and lower its margins.
Low competition
Beyond Meat doesn’t have too much in the way of competition right now. Its main competitor is Impossible Foods, which hasn’t yet gone public. And the meatless market is so large, it can easily accommodate the two companies.
However, this will change and it will probably happen sooner rather than later. There are a number of meatless startups in the works, which could affect the company’s pricing and margins in the years to come.
Summary
Beyond Meat is bouncing back from its first real obstacle as a public company. After going public with an IPO price of $25 per share, the company has stood out as the best-performing IPO of 2019.
Without a doubt, there will be challenges ahead for the company but significant gains are probably in its future as well. And with a lower valuation, this may be a good opportunity for new investors.
