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Why Inflation Could Hurt Beyond Meat Stock

The best ideas come from solving common problems. No, that’s not the driving principle behind Beyond Meat (NASDAQ:BYND). Rather, it’s the leading quote for the first commercial for UNTUCKit, the apparel maker that specializes in cl…

The best ideas come from solving common problems. No, that’s not the driving principle behind Beyond Meat (NASDAQ:BYND). Rather, it’s the leading quote for the first commercial for UNTUCKit, the apparel maker that specializes in clothes designed to be worn untucked. I must admit that I laughed off both businesses. However, the declining valuation of BYND stock might spare my blushes.

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In a way, Beyond Meat and UNTUCKit are mirror images of each other. The former has the far superior idea, addressing an idea that actually has to be solved. While we don’t think about it when we’re dining at our favorite steakhouse, the source of our culinary delight imposes an environmental impact.

According to the University of California, Davis, each year, “a single cow will belch about 220 pounds of methane.” Therefore, reducing the volume of cattle could very well have a significantly positive effect on the environment. Indeed, cattle is the number one agricultural source of greenhouse gases worldwide. That’s one of the potential areas of improvement that could bolster BYND stock.

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Another is the humanitarian angle. Increasingly, it’s becoming clear that slaughterhouses are rife with ethical violations. I’m not going to point fingers and name names. However, the abuses that have been reported are disturbing and unsettling. It’s very conceivable that the stresses of the coronavirus pandemic have accelerated these troubling behaviors.

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Should Beyond Meat and other plant-based protein manufacturers shift the cultural narrative regarding animals raised for meat, it could be a seminal moment for BYND stock. Of course, the issue is the economics.

While UNTUCKit is basically reinventing the wheel — providing a solution no one asked for — it commanded excellent branding. That’s why UNTUCKit is a success story, whereas Beyond Meat is a laggard.

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Inflation Kicks BYND Stock Where It Hurts

A common expression is that “you shouldn’t knock it until you’ve tried it.” While there are certain practices where this sentiment absolutely doesn’t apply, fake meat is a different story. Previously, I heard the criticisms underlying BYND stock but I never actually tasted the product.

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Now, I can say that not only have I tried Beyond Meat products at various participating restaurants, but I now actively seek out the plant-based option if available. Yes, it’s a complete 180 from how I viewed the company and by logical deduction, BYND stock. However, while preferences differ, I think the Beyond Burgers are a delight.

I also appreciate that they don’t seem to leave me feeling heavy as would their animal-protein counterpart. So I’m down with Beyond Meat and what the company stands for. Unfortunately, though, I can’t look beyond the premium that the plant-based version charges over the real deal.

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That was always going to be a dealbreaker in any circumstance. However, when you factor in soaring consumer inflation, I’m not sure how the company navigates this crisis.

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Clearly, it’s to Beyond’s benefit that it specializes in the broader food-manufacturing industry, thus affording the brand-consumer staple status. But that’s where the good news ends. Because Beyond products are pricier than their real-world counterparts, it doesn’t take much for consumers to make the switch back to animal proteins.

Of course, that’s a real shame on multiple fronts. Aside from the environmental and ethical concerns, evidence indicates that red meat just isn’t good for you. Per a report by Harvard Health Publishing, there’s “a clear link between high intake of red and processed meats and a higher risk for heart disease, cancer, diabetes, and premature death.”

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No Respite Appears Imminent

Since we live in a world where everyone loves pushing positivity 24/7, I don’t want to be the killjoy. However, I also don’t want to be positive for its own sake. Overall, the situation for BYND stock just doesn’t look that great, largely due to factors outside of Beyond Meat’s control.

Additionally, the rising geopolitical tensions in Eastern Europe have taken a turn, thus driving concerns about further rising costs of energy. Should that occur, you’re probably going to see expenses rise as well for Beyond, which has long struggled with profitability — or lack thereof.

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I don’t want to pile on, but it’s just another reason why you should be careful with BYND stock.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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