In its short history as a publicly traded company, plant-based meat pioneer Beyond Meat (BYND) has done a good job of perplexing Wall Street. The stock soared dramatically following its IPO last May, only to pull back almost as dramatically toward the end of 2019. It has done nicely in 2020 – with shares up by 68% on a year-to-date basis.
It has been a quirk of BYND shares, that since going public, the company has beaten estimates every quarter, yet the stock has traded lower following the reports for four of the six quarters.
True to form, this quarter’s report has followed the trend. After posting estimate-beating Q2 earnings, the past week’s market performance has been colored red.
However, taking into consideration the heavy damage the coronavirus has inflicted on the food industry, Beyond’s performance in Q2 is even more impressive. This is a point picked up by Jefferies analyst Rob Dickerson.
With restaurants shuttered for large periods of the quarter, Dickerson argues Beyond “did an impressive job pivoting its excess restaurant-bound supply to retail outlets globally, while holding onto profitability margins better than many had feared.”
Gross margins climbed 90 basis points in the quarter to 34.9%, beating the consensus’ call for 33.9%. Additionally, despite the uncertainty surrounding the food service industry, BYND keeps scoring points on the international distribution front, both within the company’s restaurant segment and alongside further penetration into retail.
“Put simply,” Dickerson said, “With increasing geographic diversification and business wins on the horizon, we do think BYND should not only be able to post elevated ongoing and go-forward revenue growth, but also doing so while expanding margins given fixed cost absorption.”
A common thread running through most of the Street’s analysis has concerned Beyond Meat’s lofty valuation. Dickerson addresses this issue, too.
The analyst believes “BYND’s revenue growth potential in the near term, brand equity within alternative plant-based protein, and its overall ESG positioning collectively support a heightened valuation,” yet with the stock currently trading at a 35% enterprise value/sales premium to other high growth food and beverage stocks such as Monster Beverage, or industry disruptors such as Netflix and Tesla, the valuation is still “punchy.”
To this end, Dickerson rates BYND shares a Hold. The positive thesis is, however, enough to justify a substantial increase to the price target, which moves from $95 to $118. The figure still suggests downside potential of 7%. (To watch Dickerson’s track record, click here)
Overall, there’s not much love for the veggie patty maker among Dickerson’s colleagues. BYND’s Moderate Sell consensus rating is based on 1 Buy, 8 Holds and 6 Sells. With a $122.25 average price target, the analysts expect shares to decline by 4% over the coming months. (See BYND stock-price forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
