Beyond Meat’s run this year is beyond belief.
Shares of the fake meat maker have soared over 820% since its initial public offering on May 2, putting Beyond Meat’s market capitalization at a whopping $13.85 billion.
That valuation is higher than that of roughly 25% of the companies in the S&P 500 index, including decades-old industry stalwarts like Molson Coors, Viacom, Under Armour, and JetBlue. At its Friday morning levels, Beyond Meat’s market cap was twice the size of Macy’s.
But while investors might still be hungry for this stock, experts’ appetites are starting to wane.
“My understanding is it’s a good product, but … from a valuation standpoint, it’s beyond ridiculous,” Quint Tatro, chief investment officer at Joule Financial, said Thursday on CNBC’s “Trading Nation.” “The company is trading at 100 times sales, 300 times cash, so … it’s not a matter of whether it’s justified at this price. It’s can they actually keep growing to justify this valuation?”
For context, Microsoft — which, at over $1 trillion, is the most valuable company in the market — trades at eight times sales and eight times cash. Amazon, a $970 billion company, trades at about four times sales and 20 times cash, Tatro said.
All in all, his thesis on Beyond Meat is simple: “It’s a no-touch.”
Matt Maley, chief market strategist at Miller Tabak, couldn’t disagree.
“It just seems to be a little out of control right now,” Maley said. “It kind of reminds me of Apple … back in 2009. “
“I remember I really didn’t think that [the] rally that we saw that year was going to be a sucker’s rally the way some people did, and a lot of retail brokers were saying they couldn’t get their customers back into the market,” Maley said. “I was saying, ‘Tell them to buy Apple, because they can relate to it. They own all these products.’ And that seemed to work.”
But while Beyond Meat does have the same kind of quality, the setup is entirely different, and that could burn investors, Maley warned.
“The problem is [that in 2009,] Apple was cheap and the market was on its back. Now you’ve got the market at all-time highs and a stock that is wildly extended here,” he said. “It’s very hard to [chart] something that’s only 3 months old, but you do see that its daily [relative strength index] chart is very overbought.”
“[It’s] not quite as overbought as it was in the middle of May, but that was followed by a 32% drop, so I really question if you want to try to buy it … and sell it up 5% from here when you know that the downside can be quite a bit,” Maley said. “I wouldn’t buy it at all up at these levels.”
Beyond Meat climbed by more than 2% in early trading on Friday.
