🥩 Are Investors Looking Past Beyond Meat?

S&P, IHS get nod; Warby Parker's losses mount.

Hey Global Investor! Here’s what you need to know before the US markets open.

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🥩 Beyond Meat: Plant-Based Heartburn?

The best listing in nearly two decades is now languishing near its 52-week low. Beyond Meat Inc.’s (BYND) Q3 results and its current quarter commentary had no meat in them, literally and figuratively! It has a long way to go before it can convince investors it has a game plan. (Tweet This)

More Sentiment, Less Action

Meat consumption in the US increased by 40% starting 1961 until 2017. However, artificially bulking up the animals through the use of chemicals and antibiotics has raised questions about the meat’s impact on human health once it’s consumed.

That said, there hasn’t been any drastic decline in the consumption of meat. But the demand for meat alternatives has soared. Retail sales of plant-based meat alternatives reached $7B in 2020, a growth of 27% year on year.

Los Angeles-based Beyond Meat looked to ride this wave with its plant-based meat substitutes like beef and pork, among the highest consumed meat in the US. It struck partnerships with chains like KFC, Starbucks, and Dunkin’ Donuts to prominently position its products.

Retail and Foodservice constituted the company’s revenue streams. Among its investors were some well-known names who could influence public opinion: Leonardo DiCaprio, Jessica Chastain, Chris Paul, Bill Gates, Tyson Foods, Biz Stone… the list goes on.

Beyond Meat went public in 2019, pricing its shares at $25. Shares rose a hard-to-believe 163% on debut. The stock eventually soared almost 9X from the IPO price to $221. That meteoric rise finally found gravity that started pulling it down. And how!

In July 2019, the company announced an underwhelming quarterly performance. To add to that, the company announced a secondary share offering of 3.25M additional shares. Investors made a beeline to exit, seeing the not-so-good results alongside a glut of shares hitting the market.

The stock tumbled 15% that day.

No Antacid In Sight!

And it’s been an inexorable slide since then. The company had revised expectations for the quarter and reduced the sales projection to $106M compared to the earlier forecast of $130M. Analysts were expecting $109.2M. Here’s how things transpired.

Key Stats From Q3:

  • Revenue: $106.4M Vs $109.2M expected
  • Loss Per Share: $0.87 Vs $0.39 expected
  • Net Loss: $54.8M Vs $19.3M YoY

If Q3 was bad, the company expects Q4 to be worse. The company has predicted sales to range between $85M – $110M for the current quarter, far lower than the $131.6M that analysts were projecting.

Higher transportation and warehousing costs, weak grocery demand, increased inventory write-offs meant losses widened more than expected. One of Beyond Meat’s plants faced water damage and affected packaging. The company wrote off almost $2M as a result. US business declined 13.9% from last year and accounted for 63% of the company’s Q3 revenue.

Is there any let up for the current quarter? It seems the operational issues will continue to plague the company and will impact sales. The labor shortage in restaurants likely will mean fewer people dining in. Rising inflation may force people to reconsider these expenses.

Analysts chimed in, voicing their disappointment that Beyond Meat’s business is reaching market saturation faster than expected and that its structural problems won’t be easy to fix. They promptly issued price warnings. That was enough for the shares to lose ground further.

YTD, shares are down 32%. The company will need to pull out a plant-based rabbit out of the hat if it’s serious about recapturing lost ground. Investors have faced a lot of heartburn these past two years and don’t have the appetite for more!

Market Reaction
BYND ended at $85.15, up 3.93%. The stock is down 32% this year.

Company Snapshot 📈

BYND $85.15 +3.22 (3.93%)

Analyst Ratings (19 Analysts) BUY 16%  HOLD 47%  SELL 37%

Newsworthy 📰

Riders: S&P Global, IHS win US antitrust approval for $44B deal with conditions (SPGI +0.41%)

Incentive: Southwest offers staff extra pay, frequent flyer miles to avoid holiday travel disruptions (LUV -1.34%)

Mixed Bag: Warby Parker sales rise 32% as eyeglass retailer’s losses widen in Q3 (WRBY +9.03%)

Later Today 🕒

  • Tyson Foods Inc. Earnings (TSN)
  • Advance Auto Parts Inc. Earnings (AAP)
  • Axon Enterprises Inc. Earnings (AXON)
  • Thoughtworks Holding Inc. Earnings (TWKS)
  • Marathon Digital Holdings Inc. Earnings (MARA)
  • Rocket Lab Inc. Earnings (RKLB)
  • Riot Blockchain Inc. Earnings (RIOT)
  • Telos Corp. Earnings (TLS)
  • Metropolitan Bank Holding Corp. Earnings (MCB)
  • Vintage Wine Estates Inc. Earnings (VWE)
  • Casper Sleep Inc. Earnings (CSPR)

Today’s Market Terminology: EBITDA

EBITDA or Earnings Before Interest, Taxes, Depreciation, and Amortization is a measure of the company’s overall financial performance. The metric is a measure of the company’s profitability

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