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Why Beyond Meat's 7% Drop in Share Price Today Is Even Scarier Than It Looks

By Rich Smith – Updated May 27, 2020 at 4:08PM

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It's been nothing but good news for the fake meat producer this week, but the stock keeps going down regardless.

What happened

On Wednesday, for the fourth trading day in a row, shares of plant-based meat producer Beyond Meat (BYND -0.07%) declined. After falling nearly 13% in early trading, Beyond Meat shares closed today down more than 7%.

So what

Since topping $140 a week ago, the shares have now lost more than 12% of their value. And that's even without any bad news for Beyond Meat during this past week. In fact, on Tuesday, two separate public-relations releases came out that should have boosted the stock.

Hamburger

Image source: Getty Images.

Jill Schmidt Public Relations cited Nielsen data showing a 224.3% increase in sales of "fresh meat alternatives" in the week ending April 25, versus the year-ago period. And the Plant Based Foods Association and SPINS, a wellness-focused data technology company, said there has been "a continued shift in consumer purchasing toward natural and organic products that enhance health and immunity ... since the beginning of the pandemic."

But despite the above, Beyond Meat stock declined in price, and continued to fall today. 

 

Now what

Perhaps this all means nothing for investors. After all, Beyond Meat has long been a volatile stock.

But a sharp rise in its meat-alternative sales last quarter (up 142% year over year) didn't translate into any improvement in cash flow for Beyond Meat. Instead, operating cash flow at the company shifted into reverse and, combined with higher capital spending, Beyond Meat ended up burning through more than $30 million during the quarter. Negative free cash flow for the past year, meanwhile, has grown past $85 million, not the best trend for a company trying to sell a niche product during a likely recession.

Growth prospects notwithstanding, perhaps investors are beginning to suspect that Beyond Meat may not be worth the 24 times trailing sales that it's currently selling for.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Beyond Meat, Inc. The Motley Fool has a disclosure policy.

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