Shares of Beyond Meat (NASDAQ: BYND) declined nearly 11% today. While there wasn't any company-specific news, the animal-free protein provider has soared since its initial public offering (IPO). Things may have gotten a little out of hand.
After all, the business boasts a market cap of about $4.4 billion -- and that factors in today's double-digit drop -- which far exceeds its enterprise value of just $800 million. The market valuation also prices it at 50 times sales. Beyond Meat is growing quickly, but there's no denying that a lot of growth is priced into shares right now.
As of 1:24 p.m. EDT, the stock had settled to a 9.2% loss.
Well, investors are understandably excited about the raging success of the first major "vegan IPO." The global meat industry is valued at an estimated $1.4 trillion, which provides an enormous market opportunity for animal-free protein products.
Beyond Meat has certainly capitalized, growing annual revenue from just $16.2 million in 2016 to $87.9 million in 2018. That growth has been catalyzed by getting its products on shelves at major U.S. grocery chains such as Kroger and established restaurant chains including TGI Fridays. While the business reported an operating loss of nearly $28 million last year, it has sufficient capital to plow into market expansion and sustain operating losses for the foreseeable future.
That said, the company is far from the only one focused on animal-free protein sources. Impossible Foods sells a plant-based burger in various restaurant chains, including an Impossible Whopper at select Burger King locations, and it's even testing a sausage product with Little Caesars. Then there's JUST Inc., Memphis Meats, Clara Foods, Geltor, Finless Foods, and dozens of others.
Beyond Meat is poised for incredible growth in the coming years. There's no shortage of demand or interest in animal-free protein sources, and the market opportunity is sufficiently large to accommodate dozens of new companies. That could also work against the business eventually, at least as far as a reasonable market valuation is concerned. Therefore, investors might expect the stock to gradually make its way to a more reasonable (read: lower) market cap in the coming quarters.
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