Beyond Meat Stock Down 24% This Year, What’s Happening?

After almost a 24% decline this year, at the current price of around $6 per share, we believe Beyond Meat stock (NASDAQ: BYND), a plant-based meat alternative – is fairly priced. BYND stock has dropped from around $8 to $6 year-to-date, largely underperforming the broader indices, with the S&P growing about 20% over the same period. The company has been facing challenging revenue and considerable cash burn for about three years now – thanks to the combination of inflation, pandemic-related shifts in demand, and rising competition. Although it would be premature to declare Beyond Meat’s stock as irreparable, the company’s current trajectory suggests a challenging outlook with no clear escape from its detrimental cycle.

In Q2 2024, the company’s revenue of $93 million was down almost 9% year-over-year (y-o-y), driven by a 14% decrease in the volume of products sold. BYND also saw its revenues decline somewhat moderately in Q2 from an -18% y-o-y decline in Q1, but again this is largely a function of prior-year comps easing as well. BYND scaled back on promotional trade discounts in the recent Q2. Along with price increases on certain products in the U.S., this resulted in a 6.1% increase in its net revenue per pound compared to the year-ago period, which includes a ~21% increase in its U.S. retail channel (largest segment) net revenue per pound. Thanks to this, the revenue declines softened in Q2 and gross margins made a major recovery. However, there are still several headwinds that continue to pressure BYND stock in the future. In the U.S., the company’s distribution has maxed out, while inventory levels remain high. Moreover, the company is dealing with low plant utilization and  lower product volume. The company also has a substantial amount of debt in its capital structure, which may become a meaningful 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 runway of $145 million (down from $194 million at year-end 2023). All said, BYND’s most pressing issues still have not been addressed.

Notably, BYND stock has performed worse than the broader market in each of the last 3 years. Returns for the stock were -48% in 2021, -81% in 2022, and -28% in 2023. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is less volatile. And it has outperformed the S&P 500 each year over the same period.

Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment around rate cuts and multiple wars, could BYND face a similar situation as it did in 2021, 2022, and 2023 and underperform the S&P over the next 12 months – or will it see a recovery?

Beyond Meat’s gross margin turned negative in 2023 and 2022 compared to its positive gross margins of 25% in 2021 and 30% in 2020. It should be noted that the company achieved a 4.9% gross margin in Q1 2024 and showed a substantial improvement to 14.7% in Q2 2024. Price increases have helped in this improvement along with lower cost of goods sold per pound and higher net revenue per pound. In addition, the company’s adjusted Q2 EBITDA came in at a loss of $23 million compared to a loss of $41 million in the year-ago period. Beyond Meat was able to bring its operating cash flow losses down to -$47.8 million so far, roughly half of the year-ago loss, driven by the gross margin expansion and reduction in operating expenses from headcount efficiencies.

We forecast Beyond Meat’s Revenues to be $326 million for the fiscal year 2024, down 5% y-o-y. We now forecast revenue per share (RPS)  to come in at $5.07. Given the changes to our revenues and RPS forecast, we have revised our Beyond Meat’s Valuation to $6 per share, based on a $5.07 expected RPS and a 1.2x P/S multiple for the fiscal year 2024 – almost in line with the current market price. Beyond Meat expects net revenues to be in the range of $320 million to $340 million in FY 2024, representing a decrease of approximately 7% to 1% compared to 2023. The company continues to anticipate operating expenses to be approximately $180 million to $190 million. Also, the company expects further gross margin progress across the balance of the year, reflecting the combined impact of more fully distributed pricing adjustments and continued moderation of promotional spending.

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.

While investors have their fingers crossed for a soft landing for the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.

[1] Returns as of 10/3/2024
[2] Cumulative total returns since the end of 2016