Could a price rally snap Beyond Meat stock out of its long-term downtrend?

After falling almost 28% this year, at a current price of around $6 per share, we believe Beyond Meat Stocks (NASDAQ: BYND ), a plant-based meat alternative, is reasonably priced. BYND shares have fallen from around $9 to $6 since the beginning of the year, largely underperforming the broader indexes, while the S&P is up about 17% over the same period. The company has been struggling with revenue and significant cash burn for about three years. The company’s shares have fallen due to a combination of inflation, pandemic-related demand shifts and increasing competition. Beyond Meat shares remain under pressure as revenue continues to decline and solvency concerns persist. Compared to its peers, BYND has yet to turn a profit for the year. Granted, it’s not surprising that Beyond Meat is unprofitable, as it’s a fairly young company (IPOed in May 2019) still in the investment phase, but its weak financial performance has left investors skeptical about its future growth.

BYND has reduced promotional trade discounts in the most recent Q2. Along with price increases for some products in the U.S., this resulted in net revenue growth of 6.1% per pound compared to the year-ago period, which includes a ~21% increase in U.S. retail channel net revenue (the largest segment) per pound. As a result, revenue declines eased in Q2 and gross margins improved significantly. However, there are still several headwinds that will continue to pressure BYND stock going forward. The company’s distribution has peaked in the U.S., while inventory levels remain high. Additionally, the company is dealing with low plant utilization, lower product volumes, and weaker U.S. business. The company also has a significant amount of debt in its capital structure, which could become a significant risk factor in the current high-interest-rate environment. BYND has $1.14 billion in debt (due in 2027) on its balance sheet and a limited cash cushion of $145 million (vs. $194 million at the end of 2023). BYND shares are up about 4% over the past month on a pleasant Q2 gross margin surprise. The company’s most pressing issues remain unresolved.

BYND stock has seen a steep 95% decline from $125 in early January 2021 to around $6 today, compared to a gain of around 50% for the S&P 500 over that roughly 3-year period. Remarkably, BYND stock has underperformed the broader market in each of the last 3 years. Stock returns were -48% in 2021, -81% in 2022, and -28% in 2023. In comparison, the S&P 500’s returns were 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that BYND underperformed S&P in 2021, 2022 and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been tough for individual stocks in recent years; for heavyweights in the consumer discretionary sector including WMT, PG and COST, and even megacap stars GOOG, TSLA and MSFT. In contrast, Trefis High Quality Portfolio, with its collection of 30 stocks, has outperformed the S&P 500 every year in the same period. Why? As a group, HQ Portfolio stocks have delivered better returns with less risk compared to the benchmark index; less of a rollercoaster ride as seen in HQ Portfolio’s performance metrics. Given the current uncertain macro environment with high oil prices and elevated interest rates, could BYND face a similar situation as in 2021, 2022 and 2023? underperform the S&P in the next 12 months – will there be a recovery?

Beyond Meat’s gross margin turned negative in 2023 and 2022 compared to positive gross margins of 25% in 2021 and 30% in 2020. Of note, the company achieved a gross margin of 4.9% in Q1 2024 and showed a significant improvement to 14.7% in Q2 2024. Price increases helped drive this improvement along with lower cost of goods sold per pound and higher net revenue per pound. In Q2 2024, the company’s revenue of $93 million declined nearly 9% year-over-year (YoY), driven by a 14% decline in product volume. BYND also saw a moderate revenue decline in Q2 from -18% YoY in Q1, but again this is largely a function of softening year-over-year comparisons. Additionally, the company’s adjusted EBITDA in Q2 was a loss of $23 million, compared to a loss of $41 million in the same period a year earlier. Beyond Meat managed to reduce its operating cash flow loss to -$47.8 million, roughly half of the prior-year loss, driven by gross margin growth and reduced operating expenses due to employee efficiencies.

We forecast Beyond Meat revenues to be $326 million in fiscal 2024, down 5% year-over-year. We currently forecast revenue per share to be $5.07. Given the changes to our revenue and RPS forecasts, we have revised our Beyond Meat valuation to $6 per share, based on an expected RPS of $5.07 and a P/S multiple of 1.2x for fiscal 2024 — nearly in line with the current market price. Beyond Meat expects net revenue to be between $320 million and $340 million in fiscal 2024, down approximately 7% to 1% from fiscal 2023. The company continues to expect operating expenses to be between approximately $180 million and $190 million. Additionally, the company expects gross margin to continue to expand over the remainder of the year, reflecting the combined impact of fully phased-in pricing adjustments and continued promotional spend moderation.

It is useful to see how his peers are doing. Check how Beyond Meat Colleagues rates on metrics that matter. You’ll find other valuable comparisons for companies across industries at Peer Comparisons.

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