Better buy: Beyond Meat vs. Shake Shack

Last year was challenging for both the faux meat maker and the "better burger" chain. But which one is a better investment today?

| More on:
beyond meat stock represented by hamburgers sitting in front of beyond meat pack

Image source: Beyond Meat

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Many restaurant chains and food companies got squashed by the pandemic in 2020. But their businesses -- and their stock prices -- could be headed for a comeback this year. Beyond Meat Inc (NASDAQ: BYND) was an initial public offering (IPO) darling in 2019, but its growth was undercut as the foodservice industry slumped amid the crisis. Shake Shack Inc (NYSE: SHAK) was also making progress until COVID-19 hit. But what investors need to think about now are their future prospects.

Modern takes on old classics

Beyond Meat, maker of plant-based patties and other meat alternatives, had a standout debut on the stock market in April 2019, gaining 250% in the first two months. Soon after, though, the stock traded down sharply, and is yet to reach its all-time highs.

The company has an exciting product line and strong partnerships with retailers such as Walmart and Target. Sales were strong before the pandemic, growing 212% in 2019's fourth quarter.

Revenue slowed significantly in 2020, and it wasn't just the closures of restaurants and catering facilities that put a dampener on its foodservice business. Its retail sales diminished as well. In the third quarter, revenue increased 2.7% driven by a 39% rise in retail sales. That was nothing to sneeze at, but was still a huge decline from pre-pandemic sales levels.

Shake Shack's sales weren't growing nearly as fast as Beyond Meat's before the pandemic. While the burger chain's revenue was growing by low double-digit percentages, comparable sales (what the company calls same-Shack sales) were growing at low-single-digit percentage rates.

Its store count remains fairly small, with 310 domestic locations and 120 international locations. Shake Shack typically opens 20 to 25 stores in a year, but it's expecting to ramp up that rate and add 35 to 40 company-owned stores in 2021. Management sees plenty of opportunities to expand store count and move into different formats such as food courts.

Leaving the pandemic behind

Beyond Meat is busy developing new products and partnerships to move the sales needle. It recently announced a deal with PepsiCo Inc (NASDAQ: PEP) to create new plant-based snacks and beverages, and it announced a new burger recipe in November that it plans to launch early this year.

These efforts could pay off down the road. But the pandemic showed that in some ways, Beyond Meat's plant-based products are not essential purchases. The company also faces strong competition from many challengers such as Impossible Foods and The Tattooed Chef (NASDAQ: TTCF)

Shake Shack delivered an encouraging update in January, announcing that comps in the fourth quarter were only down 17%, a significant improvement from the 32% slump they experienced in the third quarter. And revenue in Q4 rose 4% year over year. Meanwhile, in suburban areas, same Shack sales were flat year over year.

The chain has also been improving its digital options, adding curbside pickup, drive-thru, and testing delivery in certain markets. Its digital strategy clearly wasn't fully deployed prior to the pandemic, but it has made strides: digital orders accounted for 59% of total orders in the fourth quarter.

The restaurant chain's comps growth is typically positive but low, and it's looking to harness digital capabilities and innovate its menu offerings to accelerate that growth. I like that the company is taking it slow and figuring out its next steps while it's still small enough to significantly boost sales through new store openings. And it has a strong cash position.  

The better buy

Beyond Meat has demonstrated that it has many ways to keep growing. Its sales chart may not be as impressive as it was when the company was younger, but new products and partnerships -- though unpredictable -- hold the key to future gains. In addition, the company's greatest challenge is competition.  

Shake Shack is also still working out how to grow. But it's made excellent progress since the early months of the pandemic, and it has the cash to keep going as it works on improving its menu and figures out how to bolster its digital sales. The market thinks so too, since the burger chain's share price surged in January. At this point, I think Shake Shack has better long term growth options than Beyond Meat.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Should you invest $1,000 in Visa right now?

Before you buy Visa shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Visa wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Beyond Meat, Inc. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on International Stock News

hands holding up winners cup, asx 200 winning shares
Share Market News

Guess which stock just became the world's most valuable company?

There's a new sheriff (back) in town.

Read more »

a woman holds her hands up in delight as she sits in front of her lap
Share Market News

US jobs report ignites market rally. What could move the needle this week?

All eyes on the Federal Reserve.

Read more »

Business woman with her arms folded stands in front of multiple screens.
International Stock News

How did the Magnificent 7 fare this reporting season?

Let's explore the highlights.

Read more »

A man looking at his laptop and thinking.
International Stock News

Amazon: A good quarter but some concerns

Here's our initial take on Amazon's financial report.

Read more »

Man looks up at apple on his head.
International Stock News

Apple: Growth in a difficult environment

Here's our initial take on Apple's financial report.

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
International Stock News

Why Microsoft stock popped this week

Microsoft stock was up by 9.5% this week.

Read more »

Electric vehicle such as Tesla being charged at charging station.
International Stock News

Tesla searches for Musk successor: Why this matters

Could Elon get the chainsaw from his own board?

Read more »

customers inside and outside a Microsoft retail store
International Stock News

Microsoft shares earnings report: What's the verdict?

Investors moved the Microsoft share price significantly.

Read more »