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Here's Why Beyond Meat Is Getting Crushed Today

By Maxx Chatsko - Oct 29, 2019 at 9:48AM

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The animal-free protein developer announced solid third-quarter 2019 results and is now profitable, but investors wanted even more.

What happened

Shares of Beyond Meat (BYND -5.75%) fell as much as 24% today after the company reported third-quarter 2019 operating results. The animal-free protein developer posted its first-ever quarterly period with net income, jumped to a positive operating margin for the first nine months of 2019, and raised full-year 2019 revenue guidance (again).

Despite the progress, it appears investors wanted management to raise full-year 2019 revenue guidance much higher given the strength of the business. Additionally, the post-initial public offering (IPO) lockup period ends this week, which means early investors can now sell their shares for some long-overdue cash. That's likely to prompt an exodus of early investors -- and perhaps others looking to avoid the headache -- eager to cash in on the company's $5 billion valuation.

As of 10:30 a.m. EDT, the stock had settled to an 18.5% loss.

A chart on a chalkboard showing steady gains and then a sudden descent.

Image source: Getty Images.

So what

Beyond Meat absolutely crushed it in the third quarter. It delivered almost $92 million in total revenue, reported an operating profit of $3.5 million, and generated $4.1 million in net income. The business ended September with $312 million in cash and reported a cash outflow of $35 million total for operating and investing activities. It's well positioned to continue growing.

Metric

First Nine Months 2019

First Nine Months 2018

Change

Revenue

$199.4 million

$56.4 million

253%

Gross profit

$66.3 million

$9.7 million

582%

Operating expenses

$65.8 million

$30.6 million

115%

Operating income

$0.4 million

($20.8 million)

N/A

Net income

($11.9 million)

($22.4 million)

N/A

Data source: Press release.

The awesome quarter prompted management to raise full-year 2019 revenue guidance to at least $265 million. Astute investors will note that that suggests fourth-quarter revenue of only $65 million, a sharp drop from the recent three-month period. Considering Beyond Meat has been handed a meteoric valuation on its growth prospects, and worries are growing over competition from Impossible Foods, any sign of slowing growth won't be taken lightly.

That said, today's dip appears to be a gross overreaction. On the third-quarter 2019 earnings conference call, CEO Ethan Brown noted that the company has enough manufacturing capacity for at least $400 million in revenue in 2020 -- and has secured enough protein supply for $1.2 billion in revenue. The latter means little without sufficient manufacturing volume, but it suggests the company is planning for big growth in the next few years and putting the pieces in place in the correct order.

Now what

The business continues to reap the rewards of its strong brand presence to expand sales in retail and restaurant settings, sign on new potential customers to test its products, and expand its own manufacturing capabilities. Beyond Meat is launching in Dunkin' Donuts in November and awaiting the results from regional tests with McDonald's. Nonetheless, today's drop is a reminder of what happens to high-growth stocks when the first signs of trouble emerge, although it does appear to be an overreaction.

Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool recommends Dunkin' Brands Group. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Beyond Meat Stock Quote
Beyond Meat
BYND
$37.05 (-5.75%) $-2.26
McDonald's Corporation Stock Quote
McDonald's Corporation
MCD
$260.06 (1.27%) $3.26
Dunkin' Brands Group, Inc. Stock Quote
Dunkin' Brands Group, Inc.
DNKN

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