The fake meat saga may continue

As you may recall I shorted Beyond Meat about 2 months ago and said I expected it could crash down to $100 (see here). At the time it peaked around $240 and now it was $109. Ouch!! So my target has reached within just 2 months. I was asked if it is a good buy now? Still not a chance for me. 

You see, for many investors in the market, they often got confused about the company vs its stock. They usually think a good company must be a good stock to own. Yes, BYND is indeed a very good company with a great product and the market first mover advantage. This is all great for it but it does not mean you should buy the stock at any price. Since its IPO till about two months ago, FOMOs went crazy to chase it to so high that that to me it was really a no brainer to short it as it just couldn't go up further with an unbelievably expensive valuation. The stock was priced like it's risk-free but we all know there is no such thing as risk-free. Now, even after over 50% haircut, it is still a "risk-free" stock for those who still own it. With the company valued at $7 billion, it carries a price-to-sales ratio of 40, meaning it is currently valued at 40 times its annual sales. OK, you can argue that the company is growing at an incredible 287% year-over-year pace. So it certainly deserves a premium valuation. But you really think it can grow at such a pace to justify the still crazy valuation? In general, a stock will be considered expensive with a P/S 3 or more. With a 40 P/S, it is like there is and will be no any competition for BYND and it can just keep growing exponentially not only alluring all of those who love fake meat but may be even everyone who has to eat every day and will only eat the fake meat from BYND. Even with that illusion, I still cannot get my head around to try to justify its P/S 40 valuation.  

Unfortunately BYND is not a risk-free business at all as the fierce competition is coming, which is going to become a much bigger problem soon. Impossible Burger and countless new entries into the sector are all competing for market share. Tyson Foods, Nestlé and Kellogg - just to name a few - all want a piece of this market. Considering all this, I'm even not sure BYND at $10 will be a good buy. 

Just to be clear, I'm not saying BYND will crash down to $10 any time soon. The market is full of crazy things that cannot be easily explained with rationale. I'm pretty sure there are many BYND lovers who cannot wait to get in. After such a nightmare crash, it is very possible to see some sort of "dead cat bounce" for BYND in the near term. But I think BYND will be a great short target again if indeed another FOMO moment comes with its dead cat bounce! I hope I'm smart enough to spot the moment again when it comes!