Is it time to nibble on some Beyond Meat (BYND) stock? The plant-based meat giant has lost some of its sizzle this past six months, falling some 18%, while the S&P has risen almost 12% during that span. Meanwhile, over the past year, BYND stock has fallen more than 40%, compared to an average 25% rise for companies within its peer group.
Aside from the fact that Beyond Meat continues to post quarterly operating losses, there are increased fears of emerging competitive pressures from, among others, Impossible Foods. What’s more, the company’s once torrid growth pace has moderated in recent quarters, which has brought on concerns about profitability. But ahead of its third quarter fiscal 2021 earnings results Wednesday, the market might have gotten too pessimistic about the company’s near-term growth prospects.
The stock’s decline has been due to a combination of factors. Aside from valuation concerns and increased fears of emerging competitive threats, the company is also dealing with wage inflation and supply chain shortages. But help could be around the corner, assuming that the company’s recent partnership with McDonald’s (MCD) pans out. Analyst Peter Saleh of BTIG believes that the partnership to sell McPlant burgers could boost Beyond Meat’s revenue by as much as 35%, adding as much as $200 million in annual revenue.
It’s too soon to ring the register given that the company recently forecasted for Q3 net revenues of approximately $106 million, lowered from prior guidance of $120 million to $140 million. That’s said, it’s possible that the current stock price of $100 which has been cut by 55% from a 52-week high of $221, currently reflects the downbeat number. In other words, Beyond won’t have to impress too much on Wednesday for the stock to show signs of life.
For the three months that ended September, Wall Street expects the El Segundo, Calif.-based company to lose 38 cents per share on revenue of $110.19 million. This compares to the year-ago quarter when the loss came to 28 cents per share on revenue of $94.44 million. For the full year, ending in December, the loss is expected to be $1.31 per share, wider from a year-ago loss of 60 cents, while full-year revenue is expected to rise 22% year over year to $496.49 million.
The projected widening loss which analysts have raised over the past three months, has contributed to the stock's decline. But as noted, Beyond Meat’s revenue outlook is poised to improve with the partnership with McDonald's (MCD) to offer plant-based burgers. This partnership could help accelerate its revenue in similar fashion to when it formed deals with Starbucks (SBUX) and Dunkin’ (DNKN), among other high-profile tie-ups.
What’s more, with its product line available in more than 84 countries in 112,000 retail and food service locations, Beyond has been aggressively expanding its presence around the world, including its manufacturing plans in China. This is because the company’s aggressive growth efforts have come at a significant cost. In the second quarter, Beyond disappointed on the bottom line reporting a loss of 31 cents per share, missing the 23-cent loss expected.
While Q2 revenue rose 32% to $149.4 million, topping estimates, it was a noticeable deceleration from growth of 68% from Q2 revenue in 2020. The quarterly revenue and profits were adversely impacted by weakened food service demand resulting from the pandemic. Will this trend continue on Wednesday? For the stock to rebound, investors will want strong guidance and revenue re-accelerating from recent partnerships with McDonald's and other operating progress.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
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