Beyond Meat’s Stock Looks Expensive At $18

After almost a 52% decline over the last six months, at the current price of around $18 per share, we believe Beyond Meat stock (NASDAQ: BYND), a plant-based meat alternative – could see more declines. BYND stock has declined from around $37 to $18 over the last six months, largely underperforming the broader indices, with the S&P being about flat over the same period. The company’s stock has declined thanks to the combination of inflation, pandemic-related shifts in demand, and rising competition. Compared to its peers, BYND has not yet earned a full-year profit. While we acknowledge that it is not surprising for Beyond Meat to be unprofitable since it is a fairly young company (IPO in May 2019) still in its investing phase, the weak financials in the last few quarters have made investors skeptical about its growth ahead. In the first nine months of 2022, Beyond Meat’s gross margin turned negative compared to its positive gross margins of 25% in 2021 and 30% in 2020.

The plant-based meat maker’s net revenue declined nearly 23% year-over-year (y-o-y) to $82.5 million in Q3. Its net loss widened from $54.8 million in Q3 2021 to $101.7 million in Q3 2022, which trickled down to a loss of $1.60 per share. Its sales of Beyond Meat Jerky through a joint venture with PepsiCo, which generates much lower margins than its core refrigerated products, are applying additional pressure on its gross margin. In fact, Beyond Meat has also been paying some of its co-manufacturing partners, including PepsiCo, underutilization and termination fees for failing to produce and sell enough products. Going forward, it expects its gross margin to remain negative in the fourth quarter, but to also improve slightly on a sequential basis as it pays fewer underutilization and termination fees. It should be noted that BYND ended the third quarter with a mere $390 million in cash and equivalents on a $1.1 billion outstanding debt.

Beyond Meat expects its revenue to decline 9% to 14% for the full year 2022, which would be a significant slowdown from its 14% growth in 2021, 37% in 2020, and 239% in 2019. The company still believes its operating cash flow will turn positive by the second half of 2023 as it aggressively cuts costs and rightsizes its business. It already laid off more than a fifth of its workforce over the past 12 months, and it believes that reduction will lower its total operating expenses by about $39 million over the following 12 months.

We forecast Beyond Meat’s Revenues to be $452 million for the fiscal year 2022, down 3% y-o-y. We now forecast revenue per share (RPS)  to come in at $7.16. Given the changes to our revenues and RPS forecast, we have revised our Beyond Meat’s Valuation to $14 per share, based on a $7.16 expected RPS and a 1.9x P/S multiple for the fiscal year 2022 – almost 21% lower than the current market price. That said, the company’s stock appears expensive at the current price.

It is helpful to see how its peers stack up. Check out how Beyond Meat’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

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