Stock Analysis & Ideas

Beyond Meat Stock: Solid Value, Even after McPlant Flop

Story Highlights

Beyond Meat stock has plunged well below IPO levels amid the never-ending barrage of bad news, ranging from McPlant’s flop to endless earnings misses. With so much pessimism baked in, the risk/reward ratio is starting to become tasty.

Shares of plant-based meat substitute maker Beyond Meat (BYND) have left a bad taste in the mouths of shareholders over the past year, with a stock that shed over 90% of its value from peak to trough before recovering ever so mildly. Today, at around $36 per share, the name is far from its peak of around $240. It’s been a catastrophic implosion, making Beyond Meat stock a relic of the 2020-21 speculative run-up in markets.

Now that the stock has crashed and burned, the risk/reward seems to be tilted back in favor of venturesome investors willing to take a chance on a product they love and believe in.

Despite the negatives, headwinds, and cash bleed, I remain bullish on shares of Beyond Meat, primarily because of the depressed valuation.

Moving Beyond the McPlant

Now, there are many issues with Beyond Meat right now. The fundamentals have weakened considerably over the past year. Of late, Beyond Meat has made a habit of missing quarterly estimates. The company had reported a wider-than-expected loss for four consecutive quarters. With the recent flop of the McDonald’s (MCD) McPlant, questions linger as to whether alternative meats are genuinely ready for mainstream audiences (not just vegans or vegetarians but also meat eaters).

Indeed, the ditching of the much-anticipated McPlant is not a good sign for Beyond Meat or the plant-based meat substitute industry. It’s a devastating blow that leaves Beyond Meat in a tough spot as it looks to find new catalysts to re-excite shareholders and reignite sales.

There aren’t easy options for Beyond Meat at these depths. Independent research firm New Constructs recently rang the alarm bell on the stock, warning that a plunge to $0 per share was not out of the cards in a bear-case scenario.

Nobody wants to be caught holding a so-called “zombie company” on the way down. However, I think it’s a stretch to refer to Beyond Meat as such a firm, given the innovative technologies underneath the hood.

Further, Beyond Meat’s product has still hit the spot with many consumers and could find itself in the burgers of other big-league restaurant chains. McDonald’s may be the biggest game in town, but it’s not the only one.

Yum! Brands (YUM) and Beyond Meat have teamed up on alt-meat products before, and they could continue to create intriguing new menu items that could fuel a resurgence in the shares of both companies. For those unfamiliar with Yum! Brands, it’s the firm behind a trio of fast-food heavyweights in KFC, Taco Bell, and Pizza Hut.

As YUM looks to add Beyond across a diverse range of items, there’s a chance that a new product could stick and even hold more potential than the McPlant would ever have. If Beyond Meat can make its plant-based chicken even better than it tastes right now, then KFC alone could help bring out the best in Beyond Meat stock again and prove the doubters wrong.

Great Product, Subpar Fundamentals

I think it’s too soon to give up on the plant-based meat substitute market. The field is still in its early stages and could fuel many years of high double-digit growth. Despite competition from Impossible Foods, Maple Leaf (TSE: MFI), and many other players, Beyond Meat still looks to have a comfortable front-row seat in the nascent market.

Arguably, Beyond’s flagship product is the closest thing to replicating the taste of meat. As new updates to existing products and new product categories roll out, I do think many could regain an appetite for Beyond Meat again, as taste, texture, and nutritional value look to improve. In any case, there are serious concerns with the excessive cash bleed.

Amid hefty food price inflation, Beyond hasn’t been able to raise the price of its product that much. Beyond Meat already cost more than the real thing. Undoubtedly, many flexitarians (part-time vegetarians) likely switched back to real beef amid recent inflationary pressures.

Over time, I do think inflation’s effect will pass. For now, though, inflation and a waning economy are likely to continue weighing Beyond’s medium-term growth prospects heavily.

Make no mistake – Beyond Meat is still very much a growth stock. It has innovative capabilities to turn the ship around. At just 5.1 times sales, I’d argue the risk/reward is pretty good for investors with faith in management and the product.

In the meantime, Beyond is likely to continue clocking in considerable losses. With rising interest rates, such losses will hurt that much more. Inflation and a potential 2023 recession are just salt in the wounds of a firm that cannot seem to catch any breaks of late.

Is BYND Stock a Buy or Sell? Analysts Weigh In

Turning to Wall Street, BYND stock comes in as a Moderate Sell. Out of 12 analyst ratings, there are zero Buys, seven Holds, and five Sell recommendations.

The average Beyond Meat price target is $21.29, implying downside potential of 42%. Analyst price targets range from a low of $10.00 per share to a high of $30.00 per share.

Conclusion: Most Storm Clouds Have Passed

I think the firm’s innovative capabilities will shine through in due time. Beyond Meat is taking steps to do its best to improve upon its lackluster margins. It won’t be easy to make it through the coming economic hailstorm. However, I think most of the looming storm clouds have already impacted the stock. Shares are down around 85% from their peak, after all.

For now, I’m not buying that Beyond Meat is a zombie company. Sure, there are challenges, and the valuation got a bit out of hand in the months following the stock’s IPO. That said, there’s real innovation going on at the firm, and if it can ease margin pressures, perhaps some of its non-McDonald’s partnerships can bear fruit.

For now, volatility is pretty much a guarantee. Zero analysts view the stock as a Buy, with a Street-low price target of $10 per share — implying much more pain ahead.


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