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Beyond Meat Lacks Profits, Meaningful Growth
Stock Analysis & Ideas

Beyond Meat Lacks Profits, Meaningful Growth

Beyond Meat (BYND) has become a household name amongst plant-based meat producers, with its brand value skyrocketing over the past few years.

The company produces meat straight from plants, enabling consumers to feel the taste, texture, and other sensory attributes of traditional animal-based meat products without lacking the nutritional perks. Moreover, plant-based meat products feature environmental advantages.

The company has already started growing its market share in the growing meat industry, which is expected to surpass $1 trillion by 2025. Beyond Meat generated revenues north of $400 million last year, while management is focused on expanding Beyond Meat’s production capacities and international reach.

That said, the company’s recent growth has been underwhelming, while the bottom line is struggling to reach positive margins. I believe in Beyond Meat’s product and mission, and I will continue to be a customer. However, as an investor, I feel like Beyond Meat is too speculative for now, while losses and potential dilution ahead could deteriorate shareholder value going forward.

For these reasons, I am neutral on the stock. (See Analysts’ Top Stocks on TipRanks)

Q3: A Weak Quarter

As mentioned previously, the company’s main growth drivers, aside from the growing organic demand for plant-based products, are likely its multi-year partnerships with McDonald’s (MCD), Yum! Brands (YUM) and PepsiCo (PEP). International sales expansion should also stimulate revenue growth, with the company having yet to meaningfully expand in China and Europe.

While these drivers could boost the company’s top line going forward, this was certainly not the case in Q3, with Beyond Meat’s results coming in rather weak.

Net revenues increased only 13% year-over-year, to $106.4 million. International net revenues did increase by an exciting 143% year-over-year. However, U.S. net revenues declined 13.9% during this period, which is very worrying and certainly unfitting to a “growth company.”

Losses came in at $54.8 million, widening from last year’s losses of $19.2 million. The company ended the quarter with a rather hefty cash position of $886 million. However, at its current loss run rate, it won’t be long before the company is in need of additional liquidity, which will likely significantly dilute shareholders.

At the current stock price levels, the company will need to issue shares to raise a substantial amount of cash, and with the stock at a downward trajectory, this could even become more expensive for Beyond Meat going forward.

Valuation

Beyond Meat is currently trading at around 9.2x its FY 2021 sales, or 6.9x its FY 2022 sales, assuming the company does achieve year-over-year growth of around 33%, as analysts estimate.

Considering Q3’s weak results and the company’s own Q4 guidance — which expects net revenues in the range of only $85 million to $110 million — next year’s growth expectations may not even materialize.

Sure, the company does have a strong brand. However, growth is weak, the company is losing money, and the valuation is not even that attractive to justify taking on the underlying risks.

Wall Street’s Take

Turning to Wall Street, Beyond Meat has a Hold consensus rating, based on one Buy, six Holds, and seven Sells assigned in the past three months. At $79.50, the average Beyond Meat price target implies 23.7% upside potential.

Disclosure: At the time of publication, Nikolaos Sismanis did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates  Read full disclaimer >

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