Beyond Meat (NASDAQ:BYND), a producer of plant-based meat substitutes, recently announced earnings, and its stock spiked over 73% in after-hours trading. Then gravity set in, and the stock gave up most of the gains from the short-lived spike, as investors contemplated the as-yet unresolved challenges that have driven it down more than 94% over the past three years. With no magic bullet in sight, BYND remains a lackluster investment opportunity.
Do People Even Want This?
Beyond Meat was an earlier entrant into the production of plant-based meat substitutes. It made a name for itself in the industry with its innovative product line.
While the company enjoyed a spike in popularity (and share price) during the pandemic, recent market trends show a significant decline in demand for plant-based meats (plunging by 21% last year).
Plant-based meats are considerably more expensive than their animal-based counterparts, making them less appealing to a large share of consumers. The high cost of plant-based meat products remains a substantial hurdle in the industry’s path to growth. At some point, the cost curve may shift, and the demand for alternative meat may rebound, but based on its precarious financial position, Beyond Meat may no longer be around to benefit.
Recent Results
Beyond Meat’s recently reported financial performance in 2023 presented a mixed bag. The plant-based food company managed to exceed revenue expectations by 2%, bringing in $343.4 million, but this still represented an 18% drop compared to the previous year.
The company reported a net loss of $338.1 million for the year and a loss per share of $5.26, significantly below analyst predictions by 41%.
The company shared that sales at grocery stores declined 23% in Q4 2023, while restaurant sales fell 26%. However, sales in international markets were up, with retail sales increasing 22% and restaurant sales growing 34%. Overall, Q4 2023 revenue fell 7.8% year-over-year.
CEO Ethan Brown said on a conference call after the earnings report that the company is pivoting from a “growth at all costs operating model to one that is highly focused on sustainability and profitability.” With the top line consistently declining, it’s hard to see how a larger slice of a shrinking pie doesn’t equate to less pie overall in time.
What’s Driving BYND Stock?
BYND stock has been highly volatile over the past month. The jump in price following the earnings announcement could be as much a case of a short squeeze (BYND is heavily shorted, accounting for almost 38% of the float) as it is for some newfound bullishness on the company’s prospects.
BYND’s recent share price is trading towards the lower end of its 52-week range of $5.58-$19.25, demonstrating negative momentum (a longer-term trend observed over the past three years).
Negative shareholders’ equity makes it difficult for investors to assess the company’s financial ratios fully. However, the stock appears overvalued at these levels with a P/S of 1.5x, above both the sector (Consumer Defensive) and industry (Packaged Foods) averages of 1.1x and 0.9x, respectively.
Is Beyond Meat a Buy, Sell, or Hold?
Analysts covering BYND stock have been bearish, though Q4 results have caused some upward revisions in the estimated price target, largely in response to the company’s shift to reducing operating costs and cash use.
TipRanks lists BYND as a Moderate Sell based on nine analysts’ stock ratings in the past three months (four Holds and five Sells). Based on the 12-month price targets from these analysts, the average target is $6.86, with a range of $3-$10. This price target represents a possible downside of 14.04% from the current levels.
Bottom Line
Beyond Meat is in a challenging position. Despite fleeting spikes in stock prices and some growth in international markets, the broader picture raises serious concerns. The lingering question is whether the consumer trend toward plant-based meats can be revived meaningfully, and if so, will BNYD benefit enough to make the risk and valuation worth it?
With a host of unresolved issues, the company’s future seems murky, casting a shadow over BYND’s potential as an appealing investment opportunity. At this time, there are likely better alternatives for your investment capital.
