Beyond Meat (NASDAQ:BYND) stock spiked last week after McDonald’s announced that it would test its famed plant-based burger. The Beyond Burger has been making rounds at top restaurant chains in 2019, and it is now available across many of the top grocery retail chains across North America. Plant-based meat alternatives have exploded in popularity over the course of the decade, and this trend has driven investor interest.
Of course, the huge run-up has also inspired skepticism. Beyond Meat reached an all-time high of $239.71 in July ahead of a quarterly earnings report. Sentiment soured after the company announced a secondary share offering coupled with its earnings.
The product’s results at restaurant chains has not been entirely positive. For example, Tim Hortons pulled Beyond Meat sausages and burgers from its locations in all provinces except for British Columbia and Ontario. Restaurant Brands International, Tim Horton’s parent company, received some criticism for what was perceived as jumping on the plant-based bandwagon.
Beyond’s deal with McDonald’s is encouraging, but also carries huge risk. The company spends very little on marketing and instead relies on enriching relationships through established channels. A stumble at a major fast food chain like McDonald’s could do more to harm the brand outlook in these early stages.
Shares of Beyond possess a hefty price-to-book ratio of 27, and the company has yet to turn a profit. Beyond will need to generate more positive news this fall in order to regain its old momentum. I’m still wary of the stock at its current valuation.
