Stock Analysis & Ideas

After Breaking Below IPO Price, Beyond Meat Stock Offers Food for Thought

Based in California, Beyond Meat (BYND) produces and sells plant-based meat products in the U.S. and internationally. I am bullish on the stock.

When a stock falls below its initial public offering (IPO) price, some folks will consider this to be a bad omen. They might anticipate further share-price losses, or even a collapse of the company.

It may be tempting to envision worst-case scenarios with BYND stock because it recently broke below its May 2019 IPO price of $25. It’s amazing to consider that this is happening, as The Wall Street Journal once described Beyond Meat’s Wall Street debut as “the best open for a U.S.-listed IPO of 2019.”

Fast-forward to mid-2022, and it seems like everybody has turned on BYND stock. The share price fell below $25 but then popped back up, yet the general sentiment surrounding Beyond Meat in 2022 is risk-off.

No doubt, it would be a gutsy move to accumulate shares of BYND stock when other traders are nervous about Beyond Meat’s future prospects. However, contrarian investing means buying when others are selling and, in Beyond Meat’s case, finding positive points when the bears have seemingly irrefutable arguments.

The Hype Subsides

It’s easy to see this in hindsight, but the hype surrounding Beyond Meat and the plant-based movement in general was bound to fall off at some point. There’s certainly still a bright future for plant-based foods, but the initial burst of enthusiasm wasn’t destined to last forever.

Thus, the traders who bought BYND stock near $160 in the summer of 2021 and held their shares, are now holding the proverbial bag. They might achieve break-even at some point, but this will require a great deal of faith and patience.

Perhaps they were hoping that Beyond Meat’s first-quarter 2022 earnings report would spark a share-price rebound. Unfortunately, the market’s initial response was to sell BYND stock. Interestingly, though, the stock staged a recovery a couple of days later, shooting up 24.6% on May 13.

Amid this manic price action, informed investors should bypass the hype and speculation, and just stick to the known facts. On a long-term basis, letting the data be your guide should set you on the right path.

In terms of top-line results, Beyond Meat seemingly did just fine during 2022’s first quarter. Indeed, the company’s quarterly net revenue of $109.5 million represented a year-over-year increase of 1.2%, which is a decent result.

Not only that, but Beyond Meat’s total volume of products sold increased 12.4% year-over-year. In other words, the company seems to be selling a whole lot of meatless products. Moreover, Beyond Meat’s U.S. retail channel net revenue grew 6.9% year-over-year, chiefly driven by the company’s introduction of Beyond Meat Jerky.

Is BYND Stock Dead Meat?

So far, it looks like there’s nothing to complain about. Don’t get too excited, though, as Beyond Meat’s bottom-line Q1 2022 results are less than ideal.

The company’s quarterly per-share earnings loss of $1.58 fell short of the analysts’ consensus estimate a $1.04 per-share loss. It’s also considerably worse than Beyond Meat’s year-ago-quarter earnings loss of 42 cents per share.

What happened here? Beyond Meat President and CEO Ethan Brown explained, “the decisions we are making today in support of our long-run ambition have contributed to challenging near-term results.” In particular, the CEO cited “cost-intensive measures to support important strategic launches.”

As reported in The Wall Street Journal, Phil Hardin, Beyond Meat’s financial chief, stated that the production of Beyond Meat Jerky was expensive and inefficient. Thus, it appears that the company is experiencing growing pains, and hopefully these cost-efficiency issues will be temporary.

While the company’s widening earnings loss is troubling, there’s no need to worry that Beyond Meat is dead meat. Thomas Hayes, chairman of Great Hill Capital in New York, even seemed to suggest that there could be a prime buying opportunity here for investors.

“They’ve got over $700 million in cash so they’re not going bankrupt. The stock is down 87% from its high and I think people are saying at this level maybe I give it a shot,” Hayes stated in regard to Beyond Meat. He added that the company has “got enough margin of safety.”

At least, then, informed investors can take the bankruptcy question off the table. Going forward, you’ll definitely want to keep an eye on Beyond Meat’s bottom line and look for a narrowing net earnings loss.

Wall Street’s Take

According to TipRanks’ analyst rating consensus, BYND is a Moderate Sell, based on eight Hold and five Sell ratings. The average Beyond Meat price target is $29.17, implying a 6.63% downside potential.

The Takeaway

BYND stock has gotten past the hype phase, and is now the target of deep pessimism. There’s no substantial fear of Beyond Meat going bankrupt, but the company’s bottom-line results are far from ideal.

Just maybe, there’s a dip-buying opportunity here as Beyond Meat’s first-quarter revenue was respectable, and the company growing pains should be temporary. Hence, risk-tolerant investors might choose to take a chance on a plant-based movement bellwether with a stake in BYND stock.

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