Beyond Meat (NSDQ: BYND) is a Wall Street phenomenon. But will competitors eat its lunch? This much-ballyhooed food company could either become a market dominator like Facebook (NSDQ: FB), or a has-been like Myspace.

For deeper insights, let’s turn from Beyond Meat’s business of making vegan meat substitutes to the business of making cars.

Ever since electric vehicle (EV) manufacturer Tesla (NSDQ: TSLA) doubled in value two years ago, I’ve been wondering how long it would be before its share price took a dive. Don’t get me wrong, Tesla makes a wonderful product. Elon Musk, its charismatic and unpredictable founder, is a media darling that stirs up a lot of interest in his eclectic array of forward-thinking businesses.

But from a purely financial perspective, Tesla was clearly overvalued. The company was not remotely close to profitable, nor could Musk predict when that day might come. Musk repeatedly made promises that he could not keep, yet his very patient shareholders continued to take him at his word. Tesla barely had enough cash to keep its plant operating, much less pay a dividend to its shareholders.

Nevertheless, for a time its stock market value exceeded that of General Motors (NYSE: GM), even though GM was profitable and paid a handsome dividend. That relationship has reversed over the past six months as TSLA has shed more than a third of its value while GM has held steady. Even still, short interest in TSLA remains high at more than 25% of its float. That means there may be more room on the downside before the selling is over.

It appears investors have finally figured out that it’s the performance of Tesla’s business that matters most, not the performance of the vehicles it produces.

Likewise, I am now wondering how long it will be before shareholders of vegan food producer Beyond Meat realize it too is grossly overvalued relative to its potential for profitability. Will Beyond Meat go from stock market fad to flame-broiled failure?

Where’s the Beef?

Similar to Tesla, Beyond Meat has captured the imagination of a wide array of investors. Its signature product, the “Beyond Burger,” is a convincing substitute for ground beef in both taste and texture.

No wonder investors immediately drove its $25 per share initial public offering (IPO) price above $65 the first day it traded on May 2.

The buying frenzy continued until June 10, when BYND traded above $186. That day, trading volume in BYND approached 25 million shares. That was a record high for the stock and more than three times its average daily volume. For a brief moment, it appeared that it would not be long before Beyond Meat soared above the $200 mark.

That is, until Burger King announced that same afternoon that it was rolling out its meatless “Impossible Whopper” in select locations. Suddenly, Beyond Meat had a competitor with a product that looked and tasted a lot like theirs. The next day, BYND opened at $145, a 22% decline from the previous day’s high.

Immediately, several of the Wall Street firms that follow Beyond Meat reduced their price targets for the stock. Unlike Tesla, which holds patents on its electric battery technology that would be difficult to duplicate, the ingredients of a Beyond Burger are available to anyone. Sure, there are elements to its composition that are unique, but not to the extent that competitors can’t come up with something remarkably similar.

Expiration Date

Therein lays the fundamental problem for Beyond Meat. Its ability to retain market share will be due in large part to how well it can promote the brand and not the product. It won’t be long until all the major supermarket chains and big-box retailers have their own version of a similar product at lower prices. When that happens, Beyond Meat’s profit margins will be under full attack.

From a broader perspective, that is the risk every early adaptor takes when being first to market with a revolutionary product. Apple (NSDQ: AAPL) did not invent the smartphone, but it quickly improved on the Blackberry and ended up being the big winner in that market. Likewise, Facebook was not the first social networking site, but it shoved Myspace aside and is now a $500 billion stock.

That’s what makes investing in new product pioneers so tricky. Just as we don’t know if Tesla will ultimately become the industry giant its adherents believe it will, there is no way of telling if Beyond Meat is the next Myspace or Facebook.

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