In May 2019, when Beyond Meat (BYND) went public, there was plenty of hype around the company's product line of plant-based meat substitutes. The company was backed by marquee investors such as Bill Gates, GreatPoint Ventures, Tyson Foods (TSN), and Kleiner Perkins, and expectations called for Beyond Meat to dominate the rapidly growing plant-based food market.
Optimism was so high for Beyond Meat that its IPO was the best-performing public offering by a major U.S. company in almost two decades, since Palm listed in 2000. And revenues at BYND soared through 2021 - but as the Fed's rate-hike campaign took a toll on loss-making companies in 2022, the stock suffered a body blow.
Shares of Beyond Meat lost 81% in 2022 alone, and this year hasn't been much better. BYND has given up another quarter of its value in 2023, and - while the stock has recovered from a new all-time low of $5.58 set in late October - it still trades below $10 per share, and down about 96% from all-time highs.
Clearly, the stock has burned massive investor wealth over the years. But at current levels, is beaten-down Beyond Meat stock finally a good value buy? Let's take a look.
Why Is Beyond Meat Stock Falling?
While it's technically in the consumer staples sector, Beyond Meat's portfolio of plant-based products are priced at a premium. As soaring inflation has continued to influence consumer spending habits, demand for more discretionary grocery items, such as those offered by Beyond Meat, has suffered.
In an early November business update, management noted “further demand softness in the plant-based meat category,” and called out “weaker than expected sales of the Company’s core products, namely, Beyond Burger, Beyond Beef, and Beyond Sausage.”
Promotional activities have also failed to move the needle on sales, with the ineffectiveness “exacerbated by flat fee promotional programs that did not deliver the anticipated volume lifts," per management.
Beyond Meat's Bottom Line
Since its listing, Beyond Meat has consistently reported losses. In fact, over the past 19 quarters since its listing, the company has reported a profit on only two occasions.
In Q3 2023, Beyond Meat reported a loss per share of $1.09. Although this was narrower than the previous year's loss of $1.60 per share, it came in much wider than the consensus estimate for a loss per share of $0.89. Net revenues decreased by 8.7% from the prior year to $75.3 million, led by a sharp 31% decline in the key U.S. market. Beyond Meat ended the quarter with 183,000 distribution points, down from 190,000 in Q2 2023 and 188,000 in Q3 2022.
Although the company managed to report a positive free cash flow, it was achieved due to working capital management, which is not sustainable in the long run. In fact, for the nine months ending Sept. 30, Beyond Meat's cash balance (including restricted cash) was a mere $232.8 million, significantly lower than the outstanding debt of $1.1 billion.
Lastly, with management warning that “we expect current headwinds to persist in the coming quarters,” Beyond Meat cut its net revenue outlook for 2023 to a range between $330 million and $340 million, down from a prior outlook of $360-$380 million. This indicates an expected decrease of 21% to 19% compared to 2022.
Considering the company's unprofitability, some traditional valuation metrics are not applicable to Beyond Meat. But based on the forward price/sales ratio of 1.75 and forward EV/sales multiple of 4.72, BYND is still overpriced relative to its peers - even after the stock's steep sell-off.
What Do Analysts Forecast for BYND?
Perhaps unsurprisingly, considering the multiple fundamental challenges facing the company, analysts have a consensus “Moderate Sell” rating for BYND with a mean target price of $5.80. This denotes expected downside of more than 36% from current levels. In fact, even the Street-high target price of $9.00 is a slight discount to Friday's close at $9.09.
Out of 13 analysts covering the stock, five have a “Hold” rating, one has a “Moderate Sell” rating and seven have a “Strong Sell” rating.
