Shares of Beyond Meat (NASDAQ: BYND) went public in mid-2019 and ended the first day at $66.8. BYND stock is currently trading at $74.6 which means it has gained less than 12% in more than two years, significantly underperforming the broader markets.
The stock has lost 40% in 2021 and is trading 68% below its all-time highs. Let’s see if you need to have this stock in your growth portfolio or will it continue to underperform the indices going forward.
Beyond Meat disappoints investors with recent quarterly results
In Q3 of 2021 Beyond Meat reported revenue of $106.43 million, an increase of 12.7% year over year while its adjusted loss stood at $0.87 per share. Comparatively, Wall Street forecast sales at $109.2 million and adjusted loss at $0.39 per share in Q3. BYND also reported an adjusted EBITDA loss of $36.8 million.
The company explained sales growth was driven by strong demand in international markets. However, revenue was down close to 14% in the U.S. In the earnings call, CEO Ethan Brown attributed the revenue shortfall to rising COVID-19 cases that led to labor shortages and supply chain disruptions. However, top-line was also impacted by lower demand that spooked investors.
According to Brown, several trends hurt consumer demand in the quarter that included higher competition and the unwillingness to try out new products. This resulted in the company reporting a net loss of $54.8 million in Q3 compared to a loss of $19.3 million in the year-ago period.
Further, Beyond Meat forecast revenue between $85 million and $110 million in Q4 compared to Wall Street estimates of $131.57 million. The revenue and earnings miss as well as a tepid guidance resulted in several analyst downgrades for BYND stock. JPMorgan (NYSE: JPM) analyst Ken Goldman reduced the price target on BYND stock to $54 from $79 due to falling profit margins. The company’s operational challenges and less than impressive guidance also led to Credit Suisse lowering price targets to $60 from $75 for BYND stock.
What next for BYND stock and investors?
Beyond Meat emphasized, “Despite current disruptions, we remain focused on rapidly advancing key building blocks of long-term growth. Whether scaling products and infrastructure for our strategic quick serve restaurant partners, bringing new product to retail markets, or investing in innovation, commercialization, and production capabilities here in the U.S., EU, and China, we believe we are steadily executing against our vision of being tomorrow's global protein company.”
There is a good chance that Beyond Meat is impacted more by the rising number of players in the plant-based meat vertical rather than the ongoing pandemic. The company in fact managed to increase sales by a stellar 37% year over year in 2020 despite restrictions placed on restaurants and fast-food outlets for a majority of the last year. Now, consumer spending has increased at a rapid pace as restrictions have been relaxed which has benefitted restaurants all around the world.
Another worrying sign for investors is the company’s falling profit margins. BYND reported a gross margin of 22% in Q3 compared to 29% in the year ago period. In the first nine months of 2021, gross profit margin fell to 28% compared to 34% in the prior-year period. Beyond Meat attributed inventory write-offs as well as logistical challenges for the decline in gross margin.
Analysts expect Beyond Meat sales to increase by 14.3% to $465 million in 2021 and by 33% to $619 million in 2022. However, its loss per share is forecast to widen from $0.6 in 2020 to $1.85 in 2022.
BYND stock remains a high-risk investment given its market cap of $4.72 billion and widening losses. It might keep moving lower if the company fails to meet Wall Street expectations going forward.
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