Beyond Meat Dips 9% As Covid-19 Costs Widen 2Q Loss; Analyst Says Hold

Beyond Meat shares dropped almost 9% in after-market trading as Covid-19-related costs widened its second-quarter loss.

The stock declined to $130.20 in Tuesday’s extended market trading. As restaurant closures during the coronavirus pandemic throttled demand for Beyond Meat’s (BYND) plant-based meat products, the company decided to convert a meaningful portion of its foodservice inventory into retail product items. The added $5.9 million of expenses related to the product repacking and shift to retail, widened the company’s second-quarter net loss to $10.2 million from $9.4 million in the year-ago period. Meanwhile, sales jumped 69% to $113.3 million exceeding analysts’ expectations by almost $14 million.

Retail net revenues during the reported quarter increased 192%, while foodservice net revenues dropped 59% year-on-year. Beyond Meat added that in retail, its recent expansion into club stores including Walmart (WMT) and Costco (COST) continues to drive “exceptional growth”.

“As the toll of the Covid-19 pandemic took hold across the foodservice industry, we repurposed assets and repacked and rerouted products to meet increased consumer activity in the retail aisles,” said Beyond Meat CEO Ethan Brown. “Throughout the quarter, our brand experienced an enviable combination of consumer trends – increasing household penetration, increasing buying levels per household, and strong repeat purchase rates of nearly 50%, well above the success threshold for consumer packaged goods.”

For the remainder of the year, however, Brown anticipates that US foodservice demand will remain soft relative to a year ago, given the return of high rates of Covid-19 infections across many parts of the US, including in Los Angeles.

The company’s cash and cash equivalent balance was $222.3 million and total debt outstanding was $50 million as of June 27.

Beyond Meat’s shift to retail markets and recent international expansion deals have helped the value of its share price balloon 88% so far this year. Following the impressive rally, the $115.44 average analyst price target now indicates 19% downside potential from current levels. (See Beyond Meat stock analysis on TipRanks)

Following the 2Q earnings release, five-star analyst Rupesh Parikh at Oppenheimer said that an elevated valuation and foodservice risks keep him sidelined on the stock for now with a Hold rating.

“In the near term, we expect coronavirus to weigh upon BYND’s restaurant and foodservice results,” Parikh wrote in a note to investors. “We continue to look very favorably upon BYND’s global prospects including a large number of wins lately.”  

For now, Wall Street analysts are cautiously bearish on the stock. The Moderate Sell analyst consensus breaks down into 6 Sell and 6 Hold ratings versus 2 Buy ratings.

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