Beyond Meat, Inc. (BYND) has been struggling to make inroads into people’s plates as people are moving toward cheap protein options rather than opting for expensive plant-based meat alternatives.
BYND’s loss per share in the third quarter was higher than analyst estimates, and its revenue was 2.4% below the consensus estimate. It blamed the high inflation and the Fed’s interest rate hikes for the revenue decline.
Recently photos and internal documents surfaced from a BYND plant in Pennsylvania showing apparent mold, Listeria, and other food-safety issues. According to an internal document provided by a former employee, products from the plant tested positive for Listeria on at least eleven occasions from early June 2021 through late June 2022.
The company has currently put its expansion plans on hold as it battles falling cash reserves and high inflation, further dampening demand. According to IRI Worldwide, refrigerated meat alternatives volumes sold at retail declined 11.9% for the year ended October 9, 2022.
Barclays analyst Benjamin Theurer has downgraded the stock to underweight from equal weight. He also lowered the price target to $10 from $13. He said, “Although the company expects to turn cash flow positive by 2H23, we remain skeptical given current cash burn rates and a sizable net loss over $100 million in 3Q22.”
BYND’s stock has declined 80.2% in price year-to-date and 82.7% over the past year to close the last trading session at $12.92. Wall Street analysts expect the stock to hit $10.22 in the near term, indicating a potential downside of 20.9%.
Here’s what could influence BYND’s performance in the upcoming months:
Poor Financials
BYND’s net revenues declined 22.5% year-over-year to $82.50 million for the third quarter ended October 1, 2022. Its gross loss came in at $14.84 million, compared to a gross profit of $22.97 million in the year-ago period. The company’s adjusted net loss widened 85.5% year-over-year to $101.67 million. In addition, its adjusted loss per share widened 83.9% year-over-year to $1.60. Also, its adjusted EBITDA loss widened 100.8% year-over-year to $73.81 million.
Unfavorable Analyst Estimates
BYND’s EPS for fiscal 2022 and 2023 are expected to remain negative. Its revenue for fiscal 2022 is expected to decline 8.8% year-over-year to $423.67 million. It failed to surpass the consensus EPS estimates in each of the trailing four quarters.
Stretched Valuation
In terms of forward EV/S, BYND’s 3.77x is 128.5% higher than the 1.65x industry average. Likewise, its 1.94x forward P/S is 62% higher than the 1.20x industry average.
Weak Profitability
BYND’s trailing-12-month net income margin is negative compared to the 4.54% industry average. Likewise, its trailing-12-month EBIT margin is negative compared to the 8.38% industry average. Furthermore, the stock’s 0.34% trailing-12-month asset turnover ratio is 58% lower than the industry average of 0.81%.
POWR Ratings Reflect Bleak Prospects
BYND has an overall F rating, equating to a Strong Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. BYND has a D grade for Value, in sync with its stretched valuation.
It has an F grade for Stability, consistent with its 2.03 beta. Its weak profitability justifies its F grade for Quality.
BYND is ranked last out of 82 stocks in the Food Makers industry. Click here to access BYND’s Growth, Momentum, Sentiment, and Quality ratings.
Bottom Line
BYND is trading below its 50-day and 200-day moving averages of $14.23 and $29.52, indicating a downtrend. Despite rising beef prices, plant-based meat is not finding its way to consumers’ plates as its prices are significantly higher than other cheaper protein sources.
Besides the high inflation and falling demand, BYND is struggling with falling cash reserves and rising competition. Although the company expects to be cash flow positive in the second half of 2023, it still needs to achieve profitability.
With the possibility of a recession next year, BYND’s problems are expected to compound. Given its poor financials, unfavorable analyst estimates stretched valuation, and weak profitability, it could be wise to avoid the stock now.
How Does Beyond Meat, Inc. (BYND) Stack up Against Its Peers?
BYND has an overall POWR Rating of F, equating to a Strong Sell rating. You might want to consider investing in the following Food Makers stocks with an A (Strong Buy) or B (Buy) rating: Industrias Bachoco, S.A.B. de C.V. (IBA), Pilgrim's Pride Corporation (PPC), and Flowers Foods, Inc. (FLO).
BYND shares were trading at $14.08 per share on Wednesday afternoon, up $1.16 (+8.98%). Year-to-date, BYND has declined -78.39%, versus a -14.17% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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