Shares of Beyond Meat (NASDAQ:BYND) have tumbled roughly 60% from their peak just a few weeks ago and were down as much as 10.8% in early trading today. Shares are now trading hands at a one-year low. While the stock recovered by midday trading, investors have legitimate concerns for the business that aren't just loosely related to the broader economic fallout from the coronavirus pandemic.
In 2019, the animal-free protein developer reported that restaurants and food service channels were responsible for 51% of total revenue. With much of the United States and Europe on temporary lockdowns and many nonessential businesses closed -- including restaurants -- investors are bracing for the growth stock to slow down significantly in 2020.
As of 11:31 a.m. EDT, the stock had settled to a 1.8% loss, but investors should expect volatility to continue for the foreseeable future.
The United States and many European countries have yet to face the worst of the coronavirus pandemic -- and the next few weeks might only represent a first wave. The closing of most restaurants, in an effort to promote social distancing, pinches off a significant source of revenue for Beyond Meat.
The company's two reportable segments, restaurants and retail, were each responsible for roughly half of 2019 revenue. However, the restaurant segment has seen faster growth. In the fourth quarter of 2019, the restaurant and food service segment was responsible for over 58% of total sales.
It's possible Beyond Meat sees a surge in retail revenue thanks to panic-buying of foodstuffs across the United States, but that won't be nearly enough to completely replace lost revenue from restaurant sales.
Whereas 2019 was the year when major restaurant chains announced offerings of animal-free protein products from Beyond Meat and Impossible Foods, it looks increasingly likely that 2020 will be a year of regression for the high-growth businesses. Considering Beyond Meat traded at a premium valuation as a reflection of its growth and growth prospects, the stock's ongoing tumble isn't too surprising.
That said, investors with a long-term mindset should see this as only a temporary slowdown. That doesn't mean it will be painless, and no one can be sure how long a recovery may take, but investors should expect volatility to continue for the foreseeable future.