Plant-based meat giant Beyond Meat (BYND), which has seen its stock plunge almost 20% in thirty days, has seemingly lost all of its sizzle. Expand that timeframe by six months and one year, Beyond Meat stock has fallen 52% and 66%, respectively. Investors are likely asking themselves if now is the time to nibble on some shares.
Ahead if its fourth quarter fiscal 2021 earnings results Thursday, 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, which has impacted its once-torrid growth pace. It also appears that commercial traction is fading, which has resulted in steepening losses.
The company is coming off a quarter where revenues were up just 13%, while operating losses increased to $54 million, tripling on a sequential basis. But believing the bottom is in after recent selling pressure, analysts at Barclays recently issued a two-notch upgrade on Beyond Meat stock. The analyst believes the current share price does not reflect Beyond Meat’s growth potential in the U.S. foodservice channel and the international segment. And there is also potential upside with the the company’s recent partnership with McDonald’s (MCD) to sell McPlant burgers.
McDonald’s began rolling out the burger at roughly 600 locations in the San Francisco Bay and Dallas-Fort Worth areas earlier this month. Although this rollout accounts for just a small fraction of McDonald’s 14,000 U.S. restaurants, McPlant burgers sales could boost Beyond Meat’s revenue by as much as 35%, adding as much as $200 million in annual revenue, according to analyst Peter Saleh of BTIG Securities. In other words, Beyond Meat stock could soon get its mojo back. But the company on Thursday must instill that level of confidence.
For the three months that ended September, Wall Street expects the El Segundo, Calif.-based company to lose 71 cents per share on revenue of $101.36 million. This compares to the year-ago quarter when the loss came to 34 cents per share on revenue of $101.94 million. For the full year, the loss is expected to be $2.20 per share, wider from a year-ago loss of 60 cents, while full-year revenue is expected to rise 14.5% year over year to $465.65 million.
The projected widening loss which analysts have raised over the past three months, has contributed to the stock's decline. Missteps in execution has also hurt investors’ confidence. The pandemic hasn’t helped either. While in the early stages of shelter-in-place restrictions drove sales in its retail business, it was offset by weakness in the company’s food-service restaurant business. The effects have been glaring in the previous three quarterly reports as the company missed estimates.
In the third quarter, although Beyond Meat's revenue rose 12.7% year over year to $106.4 million, it reported adjusted EPS of 87 cents which not only missed estimates by 48 cents, it widened from the year-prior loss of 31 cents. Citing the prolonged impact of uncertainty surrounding the pandemic, the company lowered its guidance and warned of labor availability and supply chain disruptions. Will this trend continue on Thursday? For the stock to rebound, Beyond Meat will need to beat on both the top and bottom lines. Investors will want strong guidance as a way to assess whether all of the bad news is fully reflected in its stock price.
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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