- Should you buy Beyond Meat Inc (NASDAQ: BYND) stock now? Here is some information to help you decide.
Plant-based meats (PBM) company Beyond Meat Inc (NASDAQ: BYND) recently reported its Q1 2020 earnings. And the results were 3 cents a share, which was way ahead of analyst expectations. During the same period a year ago, Beyond Meat had losses of 14 cents per share.
In terms of sales, Beyond Meat Inc (NASDAQ: BYND) hit $97.1 million — which is an increase of over 141% from sales of $40.206 million during the same period a year ago. It’s worth mentioning that the 141% growth rate was actually the company’s slowest pace in two years.
And Beyond Meat reported a profit in its earnings report at $1.8 million compared to a $6.6 million net loss in the same period a year ago.
Beyond Meat suspended its guidance for the year. And Beyond Meat revealed that it is expected to continue benefiting from food-at-home consumer demand in its retail channels.
Restaurants being shut down during the pandemic and the economic crisis had a negative impact on Beyond Meat’s business operations. However, this was countered by the company’s products selling well in grocery channels.
“The health and safety of our employees and their families is our top priority and we have implemented a series of measures to minimize risks while supporting business continuity. Among other things, these include the creation of an internal task force to actively monitor new developments and maintain a constant dialog with health officials; implementation of various physical distancing and preventative hygienic protocols within our facilities; and increased frequency of our inventory reviews to ensure sufficient floor stocks of key inputs to mitigate against business disruption. During this unprecedented time, we remain steadfast in our resolve to continue to provide great-tasting plant-based meats to consumers, to solidify our support to our retail and foodservice customers, and to continue to lead the global plant-based meat movement,” said Beyond Meat President & CEO Ethan Brown in a statement.
Starting this summer, Beyond Meat Inc (NASDAQ: BYND) will be selling more value packs and offer longer discounts.
Should You Buy Beyond Meat Inc (NASDAQ: BYND) Now?
In the reports I have been reading, 20% of analysts are saying buy, 50% are saying hold, and 30% are saying sell.
Case From The Bulls
Following the earnings report, a number of financial firms upgraded their price targets for Beyond Meat:
Jefferies: Price Target Upgraded To $95 from $83
Piper Sandler: Price Target Upgraded To $95 from $72
UBS: Price Target Upgraded To $75 from $73
Update (May 21, 2020): BTIG also initiated coverage on Beyond Meat’s stock with a “Buy” rating with a price target of $173.
The bulls are saying that the PBMs should continue growing rapidly as these types of products should gain additional share from traditional ground meats. And Beyond Meat should be a major beneficiary of the growth of PBMs due to its first-move advantages. Plus the brand has strong performance in taste tests. It is also rumored that Beyond Meat will most likely be the PBM supplier for a U.S. deal with McDonald’s.
Case From The Bears
Over the weekend, MarketWatch published an article by David Trainer, Kyle Guske II, and Matt Shuler about how the Beyond Meat Inc (NASDAQ: BYND) stock is “wildly overpriced.” After Beyond Meat went public at $25, the stock price went up to $235 in just 3 months. And earlier this year, the company’s stock dropped to a low of $54. Now it is back to over $135 again. MarketWatch’s point about the stock being overpriced is based on whether Beyond Meat can justify expectations based on the stock price and face no competition.
The Beyond Market bulls could argue that the company’s revenue grew by 202% compounded every year. And the core earnings went from a loss of $14 million in 2017 to a profit of $6 million in 2019. But the improved profitability did not slow down the cash burn for the company. Free cash flow (FCF) was -$107 million in 2019 compared to -$72 million in 2018.
Beyond Meat is also facing tough competition from a number of other companies. Last year, Tyson Foods sold its stake in Beyond Meat and announced plant-based food options through a brand called Raised & Rooted. Some of the other rivals include Impossible Foods, Morningstar Farms (owned by Kellogg), Simply Plant-Based Meatless Burger (Sysco), Simple Truth (Kroger), Sweet Earth Brand (Nestlé), Gardein (Conagra), and Boca Foods (Kraft Heinz). And Beyond Meat also competes against meat-based products.
Since Kroger is investing more in its Simple Truth brand, the grocery chain will likely allocate more shelf space for its own brands rather than rivals like Beyond Meat. This puts Beyond Meat at a competitive disadvantage.
Rebecca Scheuneman, equity research analyst at Morningstar, reduced the fair value estimate for Beyond Meat to $57 from $62 due to accelerated price cuts as the company seeks to price the product at parity with meat equivalents over time.
Disclosure: I own a small number of Beyond Meat shares. I wrote this article myself and I do not have any business relationship with any company whose stock I write about. I am not a financial advisor and all articles are my opinion. You should do your own due diligence and consider talking to a financial professional before investing.